Medicare Medical Savings Account Plans
MSA plans pair a high-deductible Medicare Advantage plan with a special savings account. Medicare deposits money into your account each year to help cover healthcare costs before the deductible is met.
What Is a Medical Savings Account Plan?
A Medicare Medical Savings Account (MSA) plan is a unique type of Medicare Advantage plan that works in two parts. First, you enroll in a high-deductible health plan (HDHP) that covers all Medicare-covered services after you meet a set annual deductible. Second, Medicare deposits a fixed amount of money into a special savings account in your name at the beginning of each year.
You can use the funds in your MSA to pay for Medicare-covered services throughout the year. If your healthcare costs are low, the unused money stays in your account and rolls over to the next year, growing your balance over time. If your costs exceed the deposit, you pay out of pocket until you reach the deductible, after which the plan covers your Medicare-approved services.
MSA plans charge no premium beyond your Part B premium, and the savings account deposit can help offset costs significantly. However, these plans do not include prescription drug coverage, so you'll need to enroll in a separate stand-alone Part D plan for medications.
How MSA Plans Work
Enroll in the Plan
You join a high-deductible Medicare Advantage plan. There is no monthly premium beyond your Part B premium.
Receive Your Deposit
Medicare deposits a set amount into your savings account at the start of the year. This deposit varies by plan and is tax-free.
Pay for Services
Use your MSA funds to pay for Medicare-covered healthcare services. You can also pay out of pocket if your account balance runs low before you meet the deductible.
Full Coverage Kicks In
Once you meet the annual deductible, your plan covers all Medicare-approved services for the remainder of the year with no additional cost sharing.
Key Features of MSA Plans
- $0 plan premium: You only pay your Part B premium. There is no additional monthly premium for the MSA plan itself.
- Annual deposit from Medicare: Medicare funds your savings account with a lump sum at the beginning of each year. The exact amount depends on the plan you choose.
- Rollover balance: Any money remaining in your account at the end of the year carries over to the next year. Over time, healthy beneficiaries can accumulate a significant balance.
- High deductible: Before the plan starts covering services, you must meet an annual deductible that is higher than typical Medicare Advantage plans. The deposit helps offset this cost.
- Provider flexibility: MSA plans generally allow you to see any Medicare-accepting provider without network restrictions or referral requirements.
- No drug coverage: MSA plans do not include Part D prescription drug benefits. You must enroll in a separate stand-alone Part D plan for medication coverage.
- Qualified expenses only: MSA funds can only be used for qualified medical expenses. Using funds for non-qualified expenses may result in taxes and penalties.
Advantages and Considerations
Advantages
- No monthly plan premium beyond Part B
- Free money deposited by Medicare into your account
- Unused funds roll over and grow year after year
- Freedom to see any Medicare-accepting provider
- Great for healthy beneficiaries with low medical costs
Important Considerations
- High deductible must be met before plan pays for services
- No prescription drug coverage included — separate Part D needed
- Deposit may not cover the full deductible in high-cost years
- Not widely available — fewer MSA plans exist compared to HMO/PPO
- Cannot have other coverage that covers the MSA deductible
Is an MSA Plan Right for You?
Medicare MSA plans are not for everyone, but they can be an excellent choice for the right person. An MSA may be a good fit if:
- You are generally healthy and have low annual medical costs, allowing your savings account to grow over time.
- You want maximum provider flexibility without network restrictions or referral requirements.
- You prefer a $0 monthly premium and are comfortable with a higher deductible in exchange.
- You like the idea of building up a healthcare savings balance that rolls over from year to year.
- You understand you'll need a separate Part D plan for prescription drug coverage.
Our agents at MAC Insurance can help you determine whether an MSA plan is available in your area and whether it makes financial sense compared to other Medicare Advantage options based on your health and budget.
Learn If an MSA Plan Is Right for You
MSA plans are unique and not widely understood. Our licensed agents will explain how they work, compare them to other options, and help you decide if an MSA fits your healthcare needs and budget.