What Is a Medicare MSA?

In Medicare, recipients have the option to receive their health care through a private plan. One of these options is receiving care through a Medical Savings Account (MSA). MSAs are a type of Medicare Advantage plan that provide Part A and B coverage. MSAs are a rare type of Medicare Advantage plan that are not offered everywhere.

How it Works

• In an MSA, the plan sets up a bank account for the Medicare beneficiary. A certain amount is deposited in the bank account, and the beneficiary can use this money to pay for any health care costs. The beneficiary can use this money for items or services not typically covered by Medicare, such as dental and vision care; however, only services that are covered under Part A and Part B will count toward the deductible. At this point, all health care costs are paid for out of the bank account or out of the beneficiary’s pocket.

After the Deductible

• Once the beneficiary meets the deductible, the plan portion of the MSA kicks in and covers Part A and Part B services as needed. If there is money left in the account, the beneficiary can use it to pay for non-covered services or save it and roll it over for the future.

Drug Coverage

• Unlike most Medicare Advantage plans, Medicare beneficiaries cannot get drug coverage through an MSA. If someone wants drug coverage in addition to his MSA, he has to purchase a stand-alone Part D plan. The MSA account can be used to pay for the Part D premium and co-payments; however, these expenses do not count toward the MSA deductible.

Costs

• One of the biggest differences between an MSA and other private plans is that MSAs have a comparably high deductible. This means the MSA pays for services only when the beneficiary has paid a certain dollar amount out of his pocket. For some plans, deductibles were more than $10,000 in 2010.

  After Medicare recipients reach their deductibles, the health plan component of their MSAs kicks in and covers at least the basic Medicare coverage under Part A and Part B’s original Medicare program.

  Because of the high deductible, there is no monthly premium in addition to the standard Part B premium charged by Medicare for MSA plans.

Who Can Join

• Anyone who is eligible for both Medicare Parts A and B can join an MSA with a few exceptions. Those who have insurance that would cover them during the deductible (this includes retiree coverage, group health plan coverage, and federal and military retirees) are not eligible to join an MSA. Those who are eligible for Medicaid or have End-Stage Renal Disease also may not join.