What is a Medicare Savings Account?
While Original Medicare does cover a lot of your healthcare costs after turning 65, it doesn’t cover everything. There are still out-of-pocket expenses like premiums, copays, and coinsurance amounts to consider. When living on a fixed income having unpredictable expenses can be stressful for many. Luckily there is a program that can help.
A Medicare Savings Program (MSA) is a high-deductible Medicare Advantage plan combined with a medical savings account that allows beneficiaries the freedom to choose how they want to spend their healthcare dollars. An MSA provides a way for beneficiaries to stretch their dollars further when it comes to covering healthcare costs. Keep reading to find out how an MSA plan works as well as the advantages and disadvantages of enrolling in a Medicare Savings Account.
How Do Medicare Savings Account’s Work?
If you’ve had employer-sponsored health insurance in the past you may already be aware of Health Savings Accounts or HSA’s. Medicare Savings Accounts work in a similar way. They combine high deductible health coverage with a medical savings account that you can use to cover health-related costs.
Medicare Savings Accounts are a special type of Medicare Advantage plans offered through private insurance carriers. These plans typically come with a very high deductible. Medicare gives the plan a certain amount of money each year for your health care costs. The plan deposits the money into your Medicare Savings Account so that you can pay for your health-related expenses. The amount deposited is generally lower than your plan’s deductible amount, so you will have to pay out of pocket before your coverage begins. However, once your deductible is met, your health costs will be covered 100%. You can use your MSA to pay for health care costs that count towards your deductible, or you can use the dollars for health-related items outside of your plan’s coverage like eye exams, dental visits, etc.
Still confused about how a Medicare Savings Account works? Take a look at some examples from Medicare.gov.
Who is Eligible?
Most individuals who qualify for Medicare are eligible to sign up for a Medicare Savings Account. To enroll in an MSA account you must be enrolled in Original Medicare (Part A and Part B). You are not eligible to enroll in an MSA account even if you are eligible for Medicare if the following situations apply to you:
- Eligible for Medicaid
- In hospice care
- Have end-stage renal disease
- Live outside of the country for more than half the year
What are the Advantages of an MSA?
- No network restrictions – see any provider that accepts Medicare.
- Covers all services provided by Original Medicare – some plans offer more comprehensive coverage than is provided by Original Medicare.
- No monthly premiums – Part B premium still applies.
- Medicare provides funds yearly to the account towards your deductible.
- Funds are tax-free if used for healthcare costs.
- After your deductible is met, your costs under Original Medicare are covered 100%.
- Provides more control on how much you spend on healthcare.
What are the Disadvantages of an MSA?
- Plans have extremely high deductibles.
- Does not provide prescription drug coverage.
- You can not contribute your own money to an MSA.
- Non-healthcare related costs that are paid for by an MSA are subject to a steep penalty.
- MSA plans are not available in every area.
How to Enroll in a Medicare Savings Account
Enrollment in a Medicare Savings Program can be done during two specific enrollment periods. These enrollment periods include:
Initial Enrollment Period (IEP): This is your first opportunity to enroll in Medicare coverage including an MSA. The Initial Enrollment Period is a 7-month window that begins 3 months before your 65th birthday and ends 3 months after your birthday month.
Annual Enrollment Period (AEP): The Annual Enrollment Period runs from October 15 – December 7 each year. During this time, you can make changes to your Medicare coverage including enrolling in an MSA plan. Changes take effect on January 1 of the following year.
Interested in a Medicare Savings Account?
Speak with a qualified and licensed Independent Insurance Agent in your area to discuss whether an MSA plan is right for you. All consultations are FREE with no obligation.