What Is a Medicare Savings Account, or Medicare MSA?
Key Takeaways
- A Medicare Savings Account (MSA) combines a high-deductible health plan with a savings account funded by Medicare to help cover initial medical costs until the deductible is met.
- Enrollees can see any Medicare-approved provider and are not limited by a provider network.
- MSAs do not include prescription drug coverage and have high deductibles.
- Enrollees cannot contribute to their MSA, but unused funds roll over yearly.
- MSAs are generally more cost-effective for healthy individuals with low anticipated medical expenses.
A Medicare Savings Account, also called an MSA, is a type of Medicare Advantage plan that combines a high-deductible healthcare plan with medical savings benefits. You can use your Medicare MSA to pay for care until you meet your annual deductible, after which Medicare covers 100% of approved costs for the rest of the year. Explore the pros and cons of Medicare MSA plans below.
Medicare Advantage MSAs
Medicare Savings Accounts are a type of Medicare Advantage plan offered by private insurance companies. These plans typically include additional benefits beyond what Original Medicare offers. But whereas standard Medicare Advantage plans have provider network restrictions, Medicare MSAs do not and can be used through any Medicare provider.
There has been a 35% increase in Medicare Advantage enrollment overall from 2007 to 2024. Medicare MSAs were among the plans poised for a surge in popularity as of 2019, but only a fraction of Medicare-eligible seniors have chosen to enroll in MSAs since then.
This is likely due to limited availability in some states and high annual deductibles. However, if you are in good health and your area has Medicare Savings Account options available, these plans are worth consideration.
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Understanding the Medicare Advantage MSA
Medicare MSAs are a type of Medicare Advantage plan that enable you to use savings to pay for health costs until you meet your annual deductible and Medicare coverage kicks in. This type of plan has two critical components: a high-deductible health plan (HDHP) and an medical savings account (MSA).
Your health plan chooses a bank to maintain your account and sets the contribution amount. Unlike a standard health savings account, enrollees cannot contribute to the account. Medicare Savings Accounts do not require premiums but you must pay your separate Part B premium for coverage. You must pay out of pocket if you exhaust your MSA before meeting your deductible. Unused funds can roll over to the next year.
Key Features of Medicare Advantage MSA Plans
- Participants are not limited to a provider network of physicians and specialists
- Plans do not offer prescription drug coverage like other Medicare Advantage plans
- Enrollees must meet a high annual deductible before Medicare coverage kicks in
- Beneficiaries must open an account at the MSA’s bank of choice
- Enrollees receive a fixed contribution and cannot add funds to the account
- Unused funds can roll over to the next year
Costs For Medicare MSA Plans
- Premiums: While Medicare Savings Accounts do not require a separate additional premium, you must continue paying your Part B premium, priced at $185 for 2025, to get coverage.
- Deductibles: High deductibles are a key feature of a Medicare MSA plan, which means that, while specific annual deductible costs vary by plan, it is common for this type of coverage to require a deductible that is higher than standard plans. CMS.gov provides examples citing $3,000–$4,000 deductibles, with a $1,500–$2,500 contribution.
- Copays: Copay requirements vary by plan but typically range from $0 to $50. Your Medicare MSA may include copays for services like Part A hospital outpatient services, or you may choose to pay a copay toward separate Part D benefits or supplemental benefits after you have met your deductible.
- Coinsurance: Enrollees use MSA contributions or pay out-of-pocket for healthcare costs until they reach their annual deductible; however, once they do their expenses are covered entirely by Medicare. No coinsurance is required.
See It In Action: Medicare Savings Account
Understanding exactly how a Medicare Savings Account works can help provide a more personal breakdown of the costs involved:
- Your plan makes an annual tax-deductible contribution to your MSA, which must be opened at the bank selected by your healthcare provider.
- The fixed contribution amount is always less than the plan’s annual deductible.
- While you may not add to the MSA, your unused funds do roll over to the next year.
Let’s say your Medicare MSA requires you to meet an annual deductible of $4,000 before Medicare starts covering your medical expenses, and your plan deposits $1,950 into your MSA.
This means you would be responsible for paying $2,050 out of pocket until reaching the deductible that year. Or, you can roll over your unused funds toward meeting next year’s deductible. MSA distributions are tax-free as long as they are used legitimately for Medicare-approved expenses.
Are Medicare Advantage MSA Plans Good For You?
Medicare Savings Accounts are not inherently “good” or “bad” but may simply be more or less favorable to your particular financial situation and health needs.
Since Medicare Advantage MSAs include high deductibles, this type of account is best-suited to healthy Medicare beneficiaries who anticipate a low need for medical care and services throughout the year. Additionally, Medicare MSAs do not maintain their own provider networks. Instead, enrollees can visit any provider that accepts Medicare, nationwide.
Enrolling In Medicare Advantage
In deciding whether to enroll in a Medicare MSA, you should consider your individual financial and medical needs.
For example, if you need frequent medical care for a chronic health condition that would require you to spend money out-of-pocket until reaching the high deductible, a Medicare Savings Account may not be for you, though a standard Medicare Advantage plan may be suitable.
You may only enroll in Medicare Advantage at certain times, and only after enrolling in Original Medicare. You are eligible to join a Medicare Advantage MSA during your initial enrollment period or the Annual Enrollment Period (October 15–December 7), or if you qualify for a Special Enrollment Period.
You can switch or terminate coverage during the annual Medicare Advantage Open Enrollment Period (January 1–March 31).
Putting It All Together
Medicare Advantage MSAs pair the benefits of a medical savings account with a high-deductible healthcare plan. Beneficiaries receive a fixed annual contribution to help pay for medical expenses before reaching their deductible, when Medicare coverage kicks in. They may not make additional contributions to their account but can roll over unused funds to the next year. Participants are not required to stay within a provider network.