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Medicare Advantage MSA Plans

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By Daniel Petkevich
May 17, 2023

Do You Need a Medicare MSA Plan?

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But, with several plans to choose from, it's imperative to carefully evaluate the option that's best for you. What might work for one person may not be ideal for another.
If you're considering

Medicare Advantage plans

, one option to consider is a Medical Savings Account (MSA) plan.
Let's examine the specifics of an MSA plan and its benefits to help you determine if it's the right choice for you.

What's a Medicare MSA Plan?

A Medicare MSA (Medical Savings Account) Plan is a type of Medicare Advantage plan that works similarly to the Health Savings Account


) plans available through employers or the Marketplace.
It has two parts:
1. A high-deductible health plan
It's a type of health insurance plan with lower monthly premiums and higher deductibles than traditional health insurance plans. This means you'll need to pay a higher out-of-pocket cost to meet your yearly deductible before your plan kicks in.
2. A Medical Savings Account (MSA)
It's a unique savings account for Medicare beneficiaries to help pay for their healthcare needs. Each year, Medicare provides a predetermined amount of funds to the MSA plan based on the beneficiary's chosen plan to cover their healthcare costs. At the beginning of each calendar year (or the first month of coverage for those enrolling in the middle of the year), the MSA plan deposits this amount into the beneficiary's MSA account.
Medicare beneficiaries enrolling in an MSA plan can use the money in their MSA account to pay for medical expenses until they reach their deductible, after which the high-deductible insurance plan takes effect.
For example, suppose John is enrolled in an MSA plan which deposits $1,500 in his medical savings account and has a yearly deductible of $3,000. He must meet his yearly deductible before his plan kicks in. John can use his MSA funds to pay his deductible. Suppose John uses all of his medical savings account funds and still hasn't met his deductible. In that case, he will need to pay for any additional medical expenses out-of-pocket until he reaches the $3,000 deductible. Nevertheless, if John has any money left in his medical savings account at the end of the year, he can roll it over to the next year to use towards his deductibles and medical expenses.

What Are the Benefits of an MSA Plan?

The following are the benefits of enrolling in a Medicare MSA Plan:
  • No network restrictions
  • Zero monthly premium
  • The plan deposits tax-free funds into your MSA account each year
  • It provides 100% coverage once you meet the deductible
  • Unused funds in the MSA account carry over from year to year
  • You can use the funds in your MSA for any qualified medical expenses, as outlined by IRS
  • May provide additional benefits like dental, vision, or hearing (at an additional cost)

Can I Enroll In an MSA Plan?

Individuals with Medicare Parts A and B can enroll in a Medicare MSA plan. However, you may not be eligible for a Medicare MSA plan if:
  • You have health coverage that covers the MSA plan deductible, including employer or union retiree plans
  • You're already enrolled in another Medicare Advantage plan
  • You receive benefits from the U.S. Department of Defense (


    ) or the

    U.S. Department of Veterans Affairs

  • You are a retired Federal government employee and part of the Federal Health Benefits Program (


  • You are eligible for


  • You are currently receiving hospice care
  • You reside outside the U.S. for more than a total of 183 days a year

When Can I Enroll in an MSA Plan?

If you're considering enrolling in an MSA plan, you can do so during two periods:
  • Your IEP — when you're first eligible for Medicare
  • Annual Enrollment Period — Oct 15th to Dec 7th

Some Factors to Consider Before Enrolling In an MSA Plans

Are you looking to save on healthcare expenses with a medical savings account?
While it can be a great option, here are a few factors you must consider before making a decision.
  • Unlike with an HSA plan, you cannot deposit your own money into an MSA. Only the plan can make deposits into your account.
  • If you use up all the money in your account and have additional healthcare expenses, you'll have to pay out of pocket until you reach your plan's deductible.
  • Your Medicare

    Part A


    Part B

    expenses count towards the MSA plan deductible, but any non-Medicare expenses do not.
  • You're liable for income taxes and a 50% penalty if the funds in your MSA are used to cover non-medical expenses.
  • MSA plans do not require a plan premium, but you'll still need to pay your monthly Medicare Part B premium.
  • Some MSA plans offer extra benefits such as dental, vision, and hearing services, but you may need to pay a premium.
  • Some demonstration MSA plans may offer a lower deductible by implementing cost-sharing after the deductible is met — up to the out-of-pocket limit. Additionally, these demonstration plans may have different cost-sharing arrangements for in-network versus out-of-network care.
  • Most MSA plans require you to meet your deductible before coverage for preventive services kicks in, though some demonstration plans may offer full coverage for certain preventive services.
  • The amount your plan deposits into your Medical Savings account may change annually.

Do MSA Plans Offer Prescription Drug Coverage?

MSA plans currently do not cover Medicare Part D prescription drugs. However, you can enroll in a separate Medicare prescription drug plan (PDP) to get coverage for your prescription drugs.
You can also use your MSA savings to pay for Medicare Part D drug co-pays, which will count towards the PDP's out-of-pocket spending limit, also known as TROOP.
Additionally, note that MSA account withdrawals used for either prescription or non-prescription drugs are not taxed.

Can I Disenroll From a Medicare MSA Plan?

If you enroll in an MSA plan and later wish to leave the plan, you can do so during the Annual Enrollment Period each year (October 15 – December 7).
If you disenroll during this period, your coverage will end on January 1 of the following year.
However, under special circumstances, such as if you move out of the plan's service area or enter a nursing home, you may be able to leave your plan outside the annual enrollment period.
Note that if you decide to terminate your Medicare MSA Plan before the end of the calendar year, you may need to repay a proportion of the funds in your MSA account. The repayment amount will be prorated based on the months remaining in the current calendar year.
Your plan will notify you in writing of the termination date of your coverage, and any outstanding repayment owed to Medicare will be subtracted from your remaining MSA account balance. If your MSA account balance isn't enough to cover the repayment amount, you will be held accountable for paying the remaining balance directly to Medicare.
To switch to a new Medicare Advantage plan at the start of the following year, you just need to enroll in the new plan at the end of the year. Once your new plan coverage starts, you will be automatically disenrolled from your existing MSA plan.
MSA enrollees cannot disenroll from their Medicare MSA plan during the Medicare Advantage Open Enrollment Period (January 1 to March 31).
If you enrolled in a Medicare MSA plan for the first time during the Annual Enrollment Period and later change your mind, you can cancel your enrollment by December 15th of the same year.
However, you only have until December 7th to join another health or drug plan. After December 7th and up to December 15th, you can only revert to Original Medicare.

Medicare MSA Plans: Do You Need It?

MSA plans offer a unique opportunity to take control of your healthcare spending while enjoying the benefits of adequate coverage and network flexibility. An MSA plan may be a good option if you're relatively healthy and have low healthcare needs. Using tax-free funds to pay for your healthcare services, you can save money and invest it for future medical expenses.
Nevertheless, before enrolling, you must consider each MSA plan's deposit amount and deductibles to ensure it meets your specific healthcare needs and financial situation. If you're unsure whether an MSA plan will meet your healthcare needs,

our advisors

can provide an unbiased review of different MSA plans and help you make an informed decision. Give us a call at 888-376-2028 to speak with an advisor today.

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Join the Fair Square Medicare Newsletter to stay informed on cost savings, changes to Medicare, and other valuable healthcare information.

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