How a Medicare Medical Savings Account Works
MSA plans feature a high deductible health plan (HDHP) and a bank account to help cover your medical expenses. HDHPs include a large deductible that you have to pay in full in order to receive coverage. After you pay off this deductible, the HDHP covers 100% of your costs for the rest of the year.
As previously mentioned, MSA plans also include a bank account. In this bank account, the plan provider deposits funds every year for your medical costs. Then, you can use these funds to pay the deductible. Just know that the amount the plan provider contributes is less than the deductible.
When it comes to MSA plans, here is what else you should know:
- To be in a MSA plan, you must stay enrolled in Original Medicare.
- You are prohibited from personally depositing more money into your MSA bank account. Once you have spent all the money in the account, you pay out-of-pocket until you reach the deductible.
- Any money you have left at the end of the year will remain in the account for the next year.
- As long as the contributed funds are used for qualified medical costs, they are not taxed.
- MSA plans cannot include Part D prescription drug coverage. If you want prescription drug coverage, you must join a standalone Part D plan.
- If you decide to join a Part D plan, out-of-pocket expenses associated with the prescription drug plan do not go toward your MSA plan’s deductible.
- MSA plans usually have provider networks which are required to cover out-of-network care. However, you might pay a higher cost.