When you turn 65 or otherwise enroll in Medicare, see if a Medicare Savings Account (MSA) is available in your area. These are similar to HSAs, but a little different. They are linked to high-deductible Medicare Advantage plans. You would sign up for a high deductible Medicare-Advantage plan and also open the MSA affiliated with the plan. Medicare gives money to the plan each year, and the plan deposits some of that into your MSA each year. You don’t make any deposits in the MSA, and aren’t allowed to.
You then can choose to draw money from the MSA to pay for any expenses not covered by the Medicare plan or to meet deductibles. When you use money from the MSA to pay for part of a deductible, it counts the same as if you paid the deductible with your own money. If you don’t incur enough deductibles or non-covered expenses to draw down the balance, or choose to pay those costs from other sources, then the MSA balance is rolled over to the next year and you still will receive the next year’s deposit. This means you can allow the MSA to compound for years until you really need to draw down the account.
MSAs aren’t widely available. There isn’t an option in some areas, and in other areas there are only one or a small number of options. The MSA probably isn’t a good enough benefit that it should dictate your choice of Medicare plans. But you need to understand what they are so you can decide on the best plan for you.
RW April 2015.