Medicare Medical Savings Account Plans

A Medicare Medical Savings Account plan (MSA) is a special type of Medicare Advantage plan (Part C). This type of plan offers you more control over your health care dollars. 

There are two important parts to a Medicare MSA plan.

1. A special bank savings account
2. A high-deductible health plan

The Medicare Savings Account Plan

The savings account part of a Medicare MSA plan is self-managed – just like a regular bank savings account. The main difference is that the account is funded with money from Medicare – not by you.

Medicare gives Medicare Advantage plan sponsors a set amount of money for each beneficiary covered by the plan. The plan then uses the money to pay the Medicare-covered portion of the plan member’s health care costs.

When you have a Medicare MSA plan, the plan provider deposits the money it receives from Medicare into a savings account that you manage. You then become responsible for paying the Medicare-covered portion of your health care costs, instead of the plan. In effect, you must pay 100 percent of the cost for Medicare-covered services up to the plan deductible.

You may withdraw money from this account – tax free – and use it to help pay qualified medical expenses. Qualified expenses are defined by the Internal Revenue Service (IRS). This includes costs for services covered by Medicare Part A and Part B and some other expenses.

The plan deposits funds from Medicare into your account at the beginning of each year. The amount can vary. Funds may earn tax-free interest or investment income, and the balance carries over year to year.

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