Medicare Advantage plans are another way to get your Original Medicare (Part A and Part B) benefits from a private insurance company. Medicare Advantage MSA, or Medical Savings Account plans are a special type of Medicare Advantage plan that you may qualify for if you are eligible for Original Medicare and none of the following applies to you:

  • You have health insurance through an employer or union plan.
  • You get TRICARE or VA benefits.
  • You are a retiree covered under the Federal Employee Health Benefits Program.
  • You are eligible for Medicaid.
  • You have end-stage renal disease (ESRD). However, if your Medicare Advantage plan dropped you because it left Medicare, you can typically join a Medicare MSA Plan even if you have ESRD.
  • You are getting hospice care.
  • You reside outside the U.S. more than 183 (total) days a year.

Private insurance companies contracted with the Medicare program offer Medicare MSA plans and are required by law to cover all the same services as Original Medicare, just like other Medicare Advantage plans. Hospice care is still covered by Medicare Part A. MSA plans generally have no monthly premium, although you must continue to pay your Part B premium for as long as you are enrolled.

What is a Medicare Advantage MSA?

Medicare Advantage MSA plans are a high-deductible plan combined with a special medical savings account set up in your name that you can use to pay qualifying health care expenses, including those that contribute to your plan’s deductible. (A deductible is an amount you must spend on medical bills before your insurance begins to pay.)  Each year, Medicare pays your plan a set amount for your health care plus a separate amount your plan will deposit into a savings account in your name. You are usually responsible for paying all your Medicare Part A and Part B medical expenses until you reach your plan’s annual deductible, which varies by company and plan type.

You may use the money in your medical savings account to pay your expenses until your deductible is met. Only health-care expenses covered under Part A (hospital) and Part B (medical) apply toward your deductible, although you can use the money in your medical savings account to pay for expenses not covered by Original Medicare, such as dental care or vision care. If you don’t spend all the money in your account each year, it remains in your account and you can use it the following year. You may even earn interest on the money in your medical savings account. Only your plan can deposit money into your medical savings account; you cannot add your own money to it. The amount of the deposit may change from year to year.

Medicare MSA plans generally do not cover prescription drugs and prescription medication costs do not count toward your plan deductible. If you want Part D prescription drug coverage, you typically will need to enroll in a separate stand-alone Medicare Part D Prescription Drug Plan. Your plan premiums and copayment or coinsurance amounts also will not count toward your deductible, but you can use your account to pay for your stand-alone Medicare Part D Prescription Drug Plan copayments.

What can I use the money in my medical savings account for?

The money your plan deposits in your account, plus any interest you may earn from it, belongs to you and is typically not subject to any income tax. Technically, you can spend the money in your Medicare MSA on anything you choose. However, if you spend it on non-qualifying expenses, it will be subject to federal and state income tax plus a 50% tax penalty.

Can I have other insurance coverage if I enroll in a Medicare Advantage MSA?

You usually can’t have any type of health insurance coverage that pays for services covered under Original Medicare if you enroll in a Medicare Advantage MSA. However, you may be able to purchase separate coverage for prescription drugs, vision care, dental care, or long-term care to supplement your plan.

If you already have a Medicare Supplement Plan (Medigap), you can keep your plan, but Medigap won’t pay your deductible expenses, so it may have limited or no value to you if you have an MSA. Note that it is against federal law for anyone to sell you a new Medigap plan if you are enrolled in a Medicare MSA plan.

Still have questions about Medicare Advantage MSA plans?

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