A Medical Savings Account (MSA) plan is a type of Medicare Advantage (Part C) plan that combines coverage for Original Medicare (Part A and Part B) services with a special savings account fund you can use to pay for covered expenses tax-free. Once you have paid a deductible, the plan covers your Medicare-covered expenses. MSAs are available almost everywhere. As with other Medicare Advantage plans, terms vary from plan to plan.
- You enroll in a Medicare Savings Account. You set up a special account with a bank selected by the plan. You pay your monthly Part B premiums to Medicare. But you will not pay a monthly Medicare Advantage plan premium.
- Medicare gives your plan a certain amount of money. The plan deposits that money into your MSA. In most plans, funds in the account earn interest tax-free.
- You can use the account funds tax-free to pay for any health care services that qualify under IRS rules. Qualified services include some services that are not covered by Original Medicare.
- Amounts you pay for health care services covered by Original Medicare count toward your annual deductible, let's say $4,000.
- If you use all the money in your MSA, you pay additional health care costs out of your own pocket until you reach your annual deductible.
- Every Medicare-covered health care expense counts toward your annual deductible.
- After you reach your deductible, your plan pays 100% of Medicare-covered services. Read the details of your plan to learn more about the plan's cost sharing and out-of-pocket costs.
- Money left in your MSA at the end of the year carries over to the next year. At the start of a new year, a new allowance is deposited into your MSA. Funds accumulate tax-free.
Important: Medicare Part D prescription drug benefits are not included with MSA plans, so you'll have to join a standalone Medicare Part D plan if you want help with prescription drug costs.