Private insurance companies provide Medicare-approved coverage plans labeled “Part C.” Also referred to as “Medicare Advantage Plans,” these exclusive policies are available in six different forms. One of these forms is an MSA (Medicare Medical Savings Account), which were introduced to eligible participants five years ago.
There are two parts within an MSA plan, one being the medical savings account, and the other being a high-deductible plan. The answer to the common question of “how does the savings account work within an MSA structure?” is simple – a medical savings account is a bank savings account which is qualified to be used for eligible health care expenses. This is how it’s done:
- 1. Get yourself into Medicare by enrolling into an MSA plan.
- 2. Prepare a special bank savings account through a bank chosen by the plan. Just like any other
- bank savings account, an MSA’s saving account is managed by whom the name is under.
- 3. You’re provided a portion of money for your plan from Medicare, which takes that money and
- deposits it straight into your MSA bank account. It’s common to find that the money in the
- account have tax-free interest.
- 4. Keep your personal money away from your MSA – it can’t be deposited into the account.
- 5. Use the money available in your MSA account to pay for any health care expenses that qualify
- within the guidelines of IRS enforced rules.
- 6. Keep in mind that the guidelines include whatever’s covered by Part A and Part B Medicare, as
- well as a handful of unrelated-to-Medicare health expenses.
- 7. If you pay for any health care expenses covered by standard Medicare, these count towards
- your yearly deductible.
- 8. You will not be taxed for funds within your MSA account used to cover medical expenses, but in
- the event the account is used to cover non-medical expenses, income tax and a 50% penalty will
- be inflicted on those withdrawals.
- 9. Using all of the money in the MSA account means you have to pay from your own wallet for any
- extra health care expenses up until your yearly deductible has been reached. At that point, your
- plan will then pay for all Medicare-related expenses.
- 10. Unused money in the MSA can be used the following year – by the new year, a deposit
- containing the new allowance is placed into your MSA and thus begins a fresh new cycle.
This explains start-to-end how everything works regarding MSA funding, but what about part two – the high deductible plan? How does that work within an MSA plan? The answer to that question is just as simple.
First, it is important to be aware of what a deductible actually is. A deductible is the fixed quantity one must contribute to meet a point at which the plan then takes over to pay for the expenses. MSA plans are known to have extremely mountainous deductibles in comparison to other Part C Medicare plans.
In fact, the deductibles are so high that they usually surpass the amount Medicare put into your MSA in the first place. You will be responsible for paying for the health costs from your own wallet until you can meet the deductible. After that ship is ported, the standard coverage starts to sail.
MSA plans must minimally cover all services that are covered under Part A and B. Sometimes, you will come across an MSA plan that offers even more coverage. This compensates for the fact that Part D prescription drug coverage will never be found within MSA plan coverage, so joining a standalone Part D plan is the best you can do if you want coverage within that area.
MSA plans are available to anybody who is already enrolled within Parts A and B, but when you take on an MSA plan, you continue to pay Medicare your Part B premiums every month. There are no additional charges for Medicare Part C plan premiums.
For more information, contact the Medicare helpline 24 hours a day, seven days a week at 1-800-MEDICARE (1-800-633-4227), TTY 1-877-486-2048. If you have any more questions see this resource on Medicare.gov or start a search with us.