Medicare Advantage Plans: Medical Savings Accounts (MSA) Plans
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Medicare Medical Savings Accounts (MSAs) work very differently from other Medicare Advantage plans. Medicare gives a MSA plan a certain amount of money for each of its enrollees. The plan then deposits a portion of this money into a special health savings account for you. You draw on the money in the account to pay for medical care. If you use up the entire amount, you then pay 100 percent of your medical costs until you’ve reached the plan’s deductible limit. (The deductible may be very high — up to $10,000 or more.)
Beyond that limit, the plan pays all your costs for Medicare-covered services for the rest of the year. MSAs were available in only a few counties in 2013. But just in case you have access to one, these are their main features:
Eligibility: You must have Parts A and B. You must live in the United States for at least 183 days in the year and have no other health coverage (like a retiree plan) that would cover the MSA deductible. You can’t enroll if you have kidney failure (ESRD) or if you’re receiving hospice care for a terminal illness.
Choice of doctors and hospitals: You can go to any doctor or hospital, but the cost may be lower if you choose a provider that has a contract with the MSA plan to treat its enrollees. If the MSA offers this option (and not all do), you can ask the plan for a list of providers.
Extra benefits: You’re free to use the money in your account to pay for medical services not covered by traditional Medicare, but these payments don’t count toward your deductible.
Taxes: MSA accounts aren’t taxed as long as you use them for what the IRS calls “qualified medical expenses.” Each year you must report your account withdrawals to the IRS, using Form 1040 and Form 8853, even if you aren’t otherwise required to file an income tax return.
Prescription drugs: MSAs don’t cover prescription drugs. You can enroll in a stand-alone Part D plan to receive drug coverage. You can use your MSA account to pay for your Part D premiums and co-pays, but these expenses don’t count toward your MSA deductible.
For more information, see the official publication “Your Guide to Medicare Medical Savings Account (MSA) Plans.”