All about Medicare Medical Savings Account (MSA) plans

For people going onto Medicare, the choices can be daunting when selecting the right coordinating plan. The complicated task of researching Medicare plans is fueled by the number of plan options and by how the plans differ greatly to what newly Medicare individuals have been offered through their employer or an individual/family plan prior to turning 65.

Many individuals are disappointed to learn that they can no longer contribute to a Health Savings Account (HSA) plan on Medicare. The IRS prohibits this since Medicare is not considered a high-deductible plan.

However, for individuals looking to continue this health savings account model into Medicare, there is an option available like an HSA called a Medicare Medical Savings Account (MSA).

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For individuals looking to continue this health savings account model into Medicare, there is an option available like an HSA called a Medicare Medical Savings Account (MSA).

What is a Medicare MSA Plan?

A Medicare MSA is a type of Medicare Advantage plan that pairs a high-deductible Medicare Plan with a special savings account called a Medical Savings Account (MSA).

The Medicare MSA Plan only begins paying for Medicare approved services after the member has met the deductible.

Annually, the Medicare Advantage plan will deposit a predetermined amount of money into the member’s MSA. The amount is lower than the annual deductible.

If additional expenses are required for medical services after the amount in the savings account has been depleted, but prior to reaching the annual deductible, the member must pay for those services out of their own pocket.

What can the money in an MSA be used for?

The member can use the money toward Medicare approved services or other Qualified Medical Expenses (QME) that are not covered by Medicare. An example of non-Medicare approved QMEs are services such as dental, vision, and hearing.

Prescription drugs (Part D) are not considered QME. Only the amount spent on Medicare approved services will go toward the annual deductible.

Benefits of the MSA and potential tax implications

MSA’s contributions are not taxed. If the amount in the MSA is not used in a year, then the remaining balance will roll over and will stay in the account until used. Withdrawals from the account will not be taxed if the money is used for Qualified Medical Expenses (QME). However, money spent from the account on anything other than QMEs will be taxed.

What are the requirements of having a Medicare MSA?

A member must have their Parts A and B of Medicare in place before purchasing this plan. The plan can be elected either when the member first becomes Medicare eligible or during the Annual Enrollment Period (AEP) in the fall.

MSAs cannot contain Part D, so a member must pick up a standalone Part D (RX) plan to pair with their Medicare MSA Plan.

Individuals are not eligible for MSA plans if they have additional healthcare such as employer coverage, Medicaid, VA, or Federal Employee Benefits.

What providers are in the Medicare MSA Plan’s network?

A Medicare MSA Plan may or may not have a network of providers. If a local Medicare MSA Plan has a network, seeing providers in-network will cost less than providers out-of-network.

Some Medicare MSA Plans do not have a network. In those plans, if the provider accepts Medicare Assignment (which are most providers in the country), a member can see them. However, providers can decide at every visit whether to accept the Plan and agree to treat the MSA plan member.

A member cannot be denied emergency care due to their insurance plan.

Similarities and differences of Medicare MSAs and HSAs

Medicare MSAs
Contributions are pre-taxed
No “use it or lose it” policy that require a member to use funds by yearend
Paired with a high-deductible health plan that requires the member to meet the annual deductible before services are paid by the plan
Offers two sources contributing to the plan, such as the employer and the employee Allows contributions only from the plan

As employers continue to offer high-deductible Health Savings Accounts (HSA) to employees, individuals transitioning into Medicare may find that the Medicare MSA Plan option is familiar and a tempting resolution to their Medicare decision.

**Before electing a Medicare plan, please consult with your Medicare Agent to determine if it is the best fit**

RNR 8-2021

Contact the Medicare Supplement division

Phone: 612.617.6135 (TTY: 711)


We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer in your area. Please contact or 1-800-MEDICARE to get information on all of your options.