Health Savings Account & Medicare

Medicare recipients have many options for how they receive their health care benefits. They can either get their benefits through traditional Medicare or through private plans. If they decide to get their benefits through a private plan, they can opt for a health savings account, or as it's known in Medicare, a medical savings account. Medical savings accounts provide hospital and medical benefits. These plans are rare and are not available in all areas.

Function

• Medicare savings accounts are exactly what they sound like---a savings account set up at a bank for the Medicare enrollee. Depending on the plan and the agreement between the enrollee and the plan, a particular amount is deposited into the account. This money can be put toward any health care costs, including health care that is not typically covered by Medicare. This includes dental and vision care or dentures. However, there is a deductible that must be met for the medical savings account to begin covering services. These non-Medicare covered services will not count toward the deductible.

Post-Deductible

• Once a beneficiary spends a certain amount toward Medicare-covered services, they will have met a deductible. Now, the plan portion of the medical savings account will begin to offer coverage. It will cover Part A and Part B services. If there is still additional funds left in the medical savings account, this can be used toward non-Medicare covered services, or it can be saved for the future.

Coverage

• Medical savings accounts do not include Part D prescription drug coverage. Beneficiaries will have to purchase an additional stand-alone Part D plan. The funds in the medical savings account can be put toward the Part D premiums and the drug co-payments, but these costs will not count toward the deductible.

  Once the deductible is reached, the medical savings accounts must cover the basic services under original Medicare's Part A and Part B, but many plans may offer additional coverage.

Costs

• Medicare medical savings accounts typically have very high deductibles, especially in comparison with other Medicare Advantage plans. Medicare Interactive reports that some medical savings accounts had deductibles higher than $10,000 in 2010. Due to the high deductible, there is no additional monthly premium beyond the standard Part B premium (which was $96.40 in 2010).

Eligibility

• Generally, everyone who is Medicare-eligible can join a medical savings account. There are just a few exceptions. Anyone with supplemental coverage that would cover them during the deductible such as retiree coverage, group health plan coverage or federal retiree coverage may not join a medical savings account plan. Furthermore, Medicaid-eligible individuals and those with end-stage renal disease are not eligible.