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Medicare Medical Savings Account Plans

Medicare MSA Plans have been growing in popularity over the past few years. If you are on Medicare, you may be wondering if a Medicare MSA Plan is right for…

June 29, 2022

Written by Nikki Grillo

Medicare MSA Plans have been growing in popularity over the past few years. If you are on Medicare, you may be wondering if a Medicare MSA Plan is right for you.

In this blog post, we will explain everything you need to know about Medicare MSA Plans! We will cover what they are, what they cover, and the different types of Medicare MSA Plans offered. Plus, we will explain how they work and what the process is like.

What Are Medicare MSA Plans? 

Medical Savings Account (MSA) plans are particular types of Medicare-Advantage plans offered through private insurance companies. Essentially, Medicare partners with private insurance companies to provide people with a choice of plans for health care coverage. MSA plans are one of the many Medicare-Advantage plans available. MSA plans are consumer-directed and allow people more control over their healthcare decisions and dollars.

Usually, MSA plans don’t have a network of doctors, other hospitals, or healthcare providers allowing you the freedom to choose your health care services and providers. MSA plans are similar to Health Savings Account plans offered outside of Medicare.

MSA Plan Parts

MSA Plans merge a medical savings account with a high-deductible insurance plan. This combination of features is designed to help you use your medical savings account to pay for your health care expenses.

How does it work? With a Medicare MSA Plan, you’ll get:

  • A debit card to use for your account 
  • A high-deductible insurance plan 
  • An annual allowance deposited into your account to help pay for covered medical expenses 

Part of the process is that you must first meet your deductible before your coverage kicks in. After that, you’ll pay a coinsurance for most services. You can also use your account to pay for dental and vision care, as well as prescription drugs. In some cases, you may be able to get additional coverage through a supplemental insurance policy.

Medical Savings Account (MSA)

The first part of a MSA Plan is a special type of self-managed savings account like any other bank savings account. The significant variation from a regular savings account is that the MSA is funded with money from Medicare versus your funds.

Usually, Medicare gives Medicare-Advantage plan sponsors a specific amount of money for each beneficiary under the program. In turn, the plan uses the funds to pay the Medicare-covered allocation of the plan member’s health care expenses. 

The Funds Are Under Your Control

When you have a Medicare-MSA Plan, the plan provider deposits the funds it receives from Medicare into a medical savings account that you manage. These funds are under your control, and you become responsible for paying the cost of your health care expenses covered by Medicare-cover instead of the plan. Essentially, you must pay 100% of the cost of Medicare-covered services up to the plan deductible.

Additionally, you can withdraw tax-free funds from your medical savings account to pay for qualified medical expenses. The Internal Revenue Service specifies qualified medical expenses. This entails costs for medical expenses covered in Part A and Part B of Medicare-cover and other costs.

The Funds Are Deposited At The Beginning Of Each Year

Funds are deposited into your medical savings account at the beginning of each year. These funds may vary and are available for use effectively, and the balance carries over to the following year. The funds may also earn investment income or tax-free interest. It’s important to note that money withdrawn from the savings account and used to pay non-qualified expenses is subject to a penalty and taxation. Additionally, you cannot deposit money into your medical savings account.

High-Deductible Insurance Plan

The second part of a MSA Plan is a special type of health insurance plan offered by the private insurance company administering MSA plans. The plan has a high-deductible feature, which means that the beneficiary could face much higher expenses if they use all the money in the medical savings account before the deductible is met. Basically, the annual deductible provided by the insurance plan may be more than the amount of Medicare funds deposited in the savings account. Thus the beneficiary must be able to cover the resulting difference with his or her own money.

Meeting The Deductible

When the deductible is met, your health plan pays 100% of your Medicare-covered health care expenses. Basically, the deductible acts as the health plan’s out-of-pocket maximum. The out-of-pocket maximum is the most you can be required to pay for covered health care services. All Medicare-Advantage plans are required to have an out-of-pocket maximum.

Any Withdrawals made from your medical savings account and used to pay for Medicare-covered health care expenses count towards the health plan’s annual deductible. In other words, you can make withdrawals to pay for Medicare-covered health care expenses, and the withdrawn funds will count towards your deductible. However, funds withdrawn from your medical savings account and used to pay for other qualified medical expenses do not count towards your deductible.

Essentially, high-deductible health plans:

  • Allow you to see Medicare-listed providers
  • Cover all the Medicare-covered services
  • Do not include prescription drug coverage
  • Do not charge premiums

How MSA Plans Work

You should start by choosing and joining a high-deductible MSA plan. Then, set up a medical savings account with a bank listed or approved by the plan. The plan deposits the funds it receives into your medical savings account every year. You can use your medical savings account funds to pay for Medicare-covered services and other healthcare expenses. Be aware that only the funds used to pay for Medicare-covered expenses are subject to the plan deductible.

You may withdraw money from your medical savings account to pay for qualified medical expenses. However, if you use all of the funds in your savings account and have extra health care costs, you will have to meet your Medicare-covered services out-of-pocket until you reach your health plan’s deductible. When you’re paying for your health care expenses out-of-pocket before reaching the deductible, health care providers and doctors can’t charge you more than the medicare-approved amount.

No Out-Of-Pocket Maximum

Once you meet your deductible, your health plan will cater to all your covered services. From that point on, there is no out-of-pocket maximum. Basically, you cannot be charged more than your chosen health plan’s annual deductible for the remainder of the year. Funds left in your account at the end of the year are carried over to the following year. In other words, if you don’t use all of the funds in your account in a given year, they are added to the amount of money you’ll receive the following year.

It is important to note that when you use money from your account, you’re required to indicate how you used your account money when filing your taxes.

What is Covered by MSA Plans?

Generally, MSA plans cover all the services that Medicare-based Advantage plans must cover. Essentially, MSA plans provide all of your Part A and Part B benefits, excluding hospice services, clinical trials, and for a limited time, various new benefits that result from national coverage determinations or legislation. Additionally, MSA Plans cover all urgent and emergency medical and the majority of all medically necessary services provided by original medical covers.

MSA plans can choose not to cover the costs of healthcare services that are not deemed medically necessary. Therefore, if you’re not sure if a service is covered, you should use the services anyway. If a service is not medically necessary, we advise you to check with your health plan provider before getting the service.

Benefits of MSA Plans

MSA plans offer you the freedom of choice to take more control over your health care decisions and expenses. Essentially, you can manage your medical bills and have flexibility in choosing your health care providers and medical providers. There is no need to check with a doctor or the health plan before deciding to see certain doctors or providers.

Most MSA plans also offer coverage for services original medical covers do not provide. For instance, some MSA plans cover fitness programs 0such as gym memberships or discounts) and some dental, vision, and hearing services. So basically, you’re getting more for your money because the original Medicare-based cover won’t pay for services that are not medically necessary. Essentially, you’re being offered a higher level of care than what original medical covers provide and more autonomy to choose other covered health care providers.

Provided Benefits

MSA plans can tailor their benefit packages to offer benefits and services that you might find more convenient or helpful. For instance, some MSA plans may offer coverage for services like over-the-counter drugs, transportation to doctors’ visits, and services that promote your health and wellness, such as benefits to certain chronically ill enrollees. Essentially, these benefits will provide benefits tailored to treat specific conditions. This can help you enjoy better health outcomes and a higher quality of life.

The MSA health plans are designed to make you feel more comfortable in healthcare decision-making. This is because you have the chance to be in control of your healthcare expenses.

Nesso Senior Benefits Services

At Nesso Senior Benefits, we understand that with all of the different types of Medicare plans available, it can be confusing trying to decide which one is right for you. That’s why we want to help clear things up by giving you all the information you need to know about Medicare MSA Plans, as well as other medicare plans to choose from.

Our Nesso Group team works hard to keep on top of all the changes with Medicare so that we can provide our clients with the best and most up-to-date information. We know that trying to understand all the different parts of Medicare on your own can be difficult and time-consuming, so let us do the work for you. Contact us now to learn more!


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