MSA
Medicare offers you options for obtaining “health care” coverage from partnered private insurance firms. These firms may decide to provide a Medicare “Medical Savings Account” (MSA) plan, which is a consumer-directed Medicare Advantage plan. In general, people can enroll in a Medicare MSA plan if they have both “Part A and Part B.”
The MSA allows you to pay for medical expenses by combining a medical “savings” account with a “high-deductible” health insurance plan. Managing the funds in your account is your responsibility, including choosing whether to use “account funds” or “other available monies” to cover medical expenses.
The private insurance firms that provide Medicare Advantage plans get a “predetermined amount” of funding from Medicare for the plans. But in a Medicare MSA plan, the plan receives “extra funding” from Medicare, which it transfers into your designated savings account.
You cannot deposit funds into your MSA account; only the plan may do so. Before you sign up for MSA, you should be aware of the “deposit amount.” Every year, the deposit amount is subject to vary and may be eligible for “interest.” Any amount remaining in the current year, if any, will be added to new deposit if you continue with the Medicare MSA plan the “following year.”
Medicare MSA plans are comparable to “Health Savings Account” plans that are offered by employers or the Marketplace (i.e., are available outside of Medicare). If you select a Medicare MSA plan, your Medicare rights and protections will not change; you are still a “member/part” of Medicare.
MSA Components -
Medicare MSA consists of two components: Medical Savings Account and “High-Deductible Health Plan” (HDHP). That is, Medical Savings Account + HDHP.
Medical Savings Account -
This particular kind of “savings account” is unique/special. Medicare provides this plan with a certain amount of money “annually” to cover your medical costs.
Once at the start of the calendar year, “funds” are deposited by the plan into your designated savings account. Alternatively, should you enroll in this plan in the “middle of the year,” the funds will be transferred into your account in the first month of coverage.
The amount of deposit is unaffected by your age or health.
High-Deductible Health Plan -
Depending on the plan, this kind of coverage only begins to pay for expenses after you reach a high annual “deductible.”
Note: – Deductible is the “sum of money” you have to pay for medical expenses before your insurance starts to do so. Typically, the deductible is a yearly sum that is reset annually. Your insurance usually begins to cover a “bigger share” of your medical bills for the rest of the year once your deductible is met.
How MSA work -
Medicare Advantage plans cover all services and benefits provided by “Part A and Part B.” Your health care will be provided by a “high-deductible” Medicare Advantage plan if you choose to enroll in an MSA plan. This plan doesn’t require a monthly “premium” payment from you. But you will still need to “pay” the Part B premium each month.
Medicare Part D prescription drug coverage is not provided by MSA plans.
Medicare-eligible services are only covered by this plan after you’ve met your “deductible.” You can use the money in your special savings “account” to pay these services if you haven’t yet reached the deductible. Further, all of your Medicare-eligible services are covered by the “plan” once your deductible is met.
Expenses for Medicare “Part A and Part B” will be included in the MSA plan deductible. Expenses that are not part of Medicare do not apply to the plan “deductible.” As, any “qualified medical expense,” including non-Medicare costs, may be paid for by enrollees using their account.
Certain qualified medical expenses, such as “Part D prescription medicines, dental, or vision care,” are not covered/included by Medicare. But, several qualified medical expenses, such as “hospital stays, lab tests, and doctor visits,” are covered by Medicare.
To obtain a comprehensive inventory of the goods and services that qualify as “qualified medical expenses,” as well as additional tax details, contact the Internal Revenue Service at 1-800-TAX-FORM (1-800-829-3676).
Additionally, non-qualified or “non-medical” (such as groceries and utilities) expenses can be paid with your MSA money. Use of MSA funds for “non-qualified or non-medical” expenses will result in an additional 50% tax penalty, and the funds will also be taxed as part of your income.
| Kind of Expense | Can I pay for this “expense” using the money in my account? | Does my “deductible” include this expense? | Is there a “tax” on account funds used for this expense? |
|---|---|---|---|
| Medicare-covered services | Yes | Yes | No |
| “Qualified Medical Expenses” not covered by Medicare | Yes | No | No |
| Non-medical and non-qualified expenses | Yes | No | Yes |
| *for a comprehensive list of goods and services that qualify as “Qualified Medical Expenses,” refer to IRS Publication #969 for the tax year you are filing. | |||
A 1099-SA document/form detailing all of the “withdrawals” from your account should be obtained by you from your bank annually. If you can’t demonstrate that you have incurred “qualified medical expenses” totaling at least this sum, you may be subject to further fines and taxes. MSA enrollees are required to disclose account withdrawals on an annual basis by filing Forms “1040 and 8853.”
Note: – To make it simple to track your account usage for tax purposes, you should save any health care “receipts or bills” you get.
Other Coverage and MSA -
You usually cannot have another health insurance that would pay for services taken during “the annual deductible period of a Medicare MSA plan.” Because reaching the “deductible” would be impossible with other insurance covering the expenses of the services.
However, you can purchase “limited benefit” policies — like dentistry, vision, or long-term care — in addition to the coverage provided by your Medicare MSA plan. For additional information about these kinds of private insurance policies, give a call to the “State Health Insurance Assistance Program” (SHIP) in your community/area.
You can pay your Part D medication “copayments” with your account. The Part D copayment amounts are not adjusted to your “deductible” of your Medicare MSA plan.
MSA and Medigap -
It’s against the law for anyone to try to sell you a “new” Medigap policy if you have a Medicare MSA plan. Pre-existing Medigap policies are allowed to be kept continue. But while enrolled in a Medicare MSA plan, you’ll still be required to pay your Medigap premiums and you can receive “little to no benefit” from it. It will not cover any portion of your “deductible.” Except in “specific circumstances,” you might not be able to recover your Medigap policy back if you cancel it.
MSA and Part D -
If you are enrolled in a Medicare MSA plan and “have prescription drug coverage under your Medigap policy,” you can keep using this coverage to pay for a few of your prescription. Further, if you enroll in a Medicare “prescription drug plan,” you must notify the company that provided your Medigap policy, and they will withdraw the drug plan from your Medigap policy.
If you opt later to enroll in a Medicare Prescription Drug Plan after initially choosing to maintain your Medigap drug coverage, you may be assessed a late enrollment “penalty.”
Who is not eligible for Medicare MSA plan -
You are ineligible to enroll in a Medicare MSA plan if “any” of the following describe you:
- Either the US Department of Veterans Affairs or the “US Department of Defense” (TRICARE) provides benefits to you.
- You are covered by health benefits under “an employer- or union-sponsored group” health plan, which would cover the Medicare MSA plan “deductible.”
- You qualify for “Medicaid” (a collaborative federal-state initiative that assists certain low ‘income and resource’ constrained individuals with their medical expenses).
- As a former federal employee, you are covered under the “Federal Employee Health Benefits Program” (FEHBP).
- You are receiving hospice care at this time.
- “End-Stage Renal Disease” (ESRD) is apparent in you. ESRD is a chronic kidney disease that necessitates kidney “transplantation or dialysis.” Nonetheless, even if you have ESRD, you can enroll in a Medicare MSA plan if you were previously enrolled in a “Medicare Advantage” plan, left Medicare, and haven’t enrolled in another Medicare Advantage plan.
- You spend more than 183 (total) days of the year living “abroad.”
Plans endorsed by unions or businesses may be exclusive to “members or employees.”
Is it ever possible for my Medicare MSA Plan to cancel my enrollment -
If “any” of the following happens, your enrollment will be cancelled by your plan:
- You sign up for a plan under the “Federal Employee Health Benefits Program” (FEHBP).
- Medicaid is granted to you.
- You receive “benefits” (similar to a group health plan offered by your company or union) that count towards all or a portion of the annual MSA “deductible” permanently.
- Either the US Department of Veterans Affairs or the “US Department of Defense” (TRICARE) provides benefits to you.
- You relocate outside of the plan’s service area or “leave the ‘service area’ for a period of time longer than six months.”
When you first become eligible for Medicare, or “during the Open Enrollment Period, which runs from October 15 to December 7, each year,” you can enroll in a Medicare MSA plan. And, throughout the year, members of “employer or union groups” may choose to enroll or disenroll.
*the aforementioned data came from “medicare.gov/health-drug-plans/health-plans/your-coverage-options/MSA”, “cms.gov/files/document/medicare-guide-medical-savings-account-plans.pdf”, etc.
For guidance and recommendations on “how selecting a Medicare MSA plan may impact your financial circumstances,” get in touch with your personal financial advisor.
Link to official page of “MSA”: https://www.cms.gov/medicare/health-drug-plans/medical-savings-account/
That’s all friends.
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