After you reach the age of 65, Medicare pays for most of your medical expenses, but not all. You might be eligible for a Medicare medical savings account, a high-deductible Medicare plan (Medicare savings account). These healthcare plans make use of a government-funded flexible savings account.

These plans allow some Medicare recipients to stretch their money further when covering the cost of their deductibles and copays.

Medicare savings accounts aren’t as popular as you might think, owing to many misunderstandings about who’s eligible and how they function. This article will go over the fundamentals of Medicare savings accounts, the benefits, and the drawbacks of having one.

What is a Medicare Medical Savings Account or MSA?

Like employer-sponsored health savings accounts (HSAs), Medicare MSAs are a choice for people with high-deductible private health insurance plans. An MSA is an example of a Medicare Advantage plan, also known as Medicare Part C. This is the most significant distinction. MSAs are sold by private insurance companies who work with banks to set up the accounts.

Suppose you have an MSA; Medicare deposits a certain amount of money into it at the start of each year. The money you save in your MSA is tax-free. It’s tax-free to withdraw money from your MSA, as long as you use it for eligible healthcare expenses.

The rest of your Medicare-eligible healthcare costs are covered through the end of the year once you’ve met your annual deductible with the MSA.

If you pay an additional premium, you can get vision, hearing aids, and dental coverage and use your MSA to pay for them.

An MSA does not automatically cover prescription drug coverage, also known as Medicare Part D. You can purchase Medicare Part D coverage separately and still use your Medicare MSA to pay for prescription drugs. On the other hand, drug copays do not count toward your deductible. They’ll count toward the out-of-pocket spending limit in Medicare Part D.

What is covered by a Medicare MSA Plan?

A Medicare savings account is required to cover anything original Medicare would cover. This includes Medicare Part A (hospitalization) and Medicare Part B (outpatient health care).

The doctors and healthcare coverage network may be more comprehensive than the original Medicare__ because Medicare savings account plans are Medicare Advantage plans (Part C).

A Medicare MSA does not cover vision, dental, prescription drugs, and hearing aids. These types of coverage can be added to your plan, but they will cost you an extra monthly premium.

If you have an MSA, contact your State Health Insurance Assistance Program (SHIP) to see what additional insurance plans are available in your area.

A Medicare MSA plan does not cover cosmetic or elective procedures. Because holistic healthcare procedures, alternative medicine, and nutritional supplements are not deemed medically necessary by a physician, they are not covered. On a case-by-case basis, physical therapy, diagnostic tests, and chiropractic care may be covered.

What is the cost of a Medicare MSA?

You must still pay your Medicare Part B monthly premium even if you have a Medicare MSA plan.

Because Medicare savings accounts do not cover prescription drugs and are legally required to have that coverage, you must also pay a premium to enroll in Medicare Part D separately.

Once you’ve received your initial deposit, you can transfer the funds from your Medicare MSA to a different financial institution’s savings account. If you do, you may be subject to the bank’s minimum balance, transfer fee, and interest rate policies.

Withdrawing money for anything other than approved medical expenses incurs penalties and fees.

Who is eligible for a Medicare Medical Savings Account (MSA)?

Some Medicare beneficiaries are not eligible for a Medicare savings account. If you meet the following criteria, you are not eligible for an MSA:

  • You qualify for Medicaid.
  • You’re undergoing hospice treatment.
  • You’ve kidney disease that has progressed to the end stage.
  • You already have health insurance covering your annual deductible in full or in part.
  • You spend at least half of the year outside of the United States.

During the annual election period, which runs from October 15th to December 7th, you can enroll in a Medicare savings account. When you first enroll in Medicare Part B, you can also enroll in the program.

When should you use a Medicare Medical Savings Account (MSA)?

Before enrolling in an MSA, there are two critical questions to ask yourself:

  • What is the deductible going to be? MSA plans usually have a very high deductible.
  • What will Medicare’s annual deposit be? To determine how much of the deductible you’ll have to pay before Medicare covers your treatment, subtract the annual deposit from the deductible amount.

If your deductible is $4,000 and Medicare pays $1,000 toward your MSA, you’ll have to pay the remaining $3,000 out of pocket before Medicare covers your care.

A Medicare savings account might be a good idea if you spend a lot of money on high premiums and would instead put that money toward a deductible. Although a high deductible may appear to be a large sum at first, these plans limit your annual spending, so you know exactly how much you’ll have to pay.

In other words, an MSA could help you track how much you spend on healthcare each year, which can give you a lot of peace of mind.


Medicare savings accounts help people with Medicare with their deductibles. It also gives them more control over their healthcare spending. These plans have much higher deductibles than comparable plans. On the other hand, MSAs ensure a significant, tax-free contribution to your deductible each year.

If you’re thinking about opening a Medicare savings account, consult a financial planner or call Medicare directly. You can also visit our website to learn more.