Paying for Medicare has always been more complicated than it needs to be. It feels like each year there are new hoops to jump through, and because we don’t have any other choice, we go ahead and jump through them.
The Medicare MSA Plan is the breath of fresh air that Medicare enrollees have been waiting for. This two-part benefit strategy that combines Medicare insurance with a specialized, tax-advantaged savings account. The result is Medicare coverage that is smarter, simpler, and more valuable than ever before.
Here’s what you need to know:
What is a Medicare MSA Account / Medicare MSA Plan?
The “Medicare MSA” is a two-part plan that combines high-deductible Medicare insurance with a plan-funded medical savings account.
Part one is the Medicare MSA Plan. These are a specialized, high-deductible form of Medicare Advantage that pay out a portion of their benefits in the form of a direct deposit.
Part two is the Medical Savings Account (MSA). This is the tax-advantaged account that your annual benefit deposit goes into. The money in your MSA is owned and controlled by the policy holder, and can be used to pay for health care costs.
READ MORE: Frequently Asked Questions About Medical Savings Accounts (MSAs) and MSA Plans
How to Set Up a Medicare MSA Account in 6 Easy Steps
Opening a Medical Savings Account is a multi-step process, but with some guidance from your Personal Benefits Manager, you can complete the process in less than an hour. Here’s how to set up your Medicare MSA in six easy steps:
Step 1: Choose a qualified high-deductible Medicare MSA Plan
Medicare MSA Plans are a type of Medicare Advantage. This means that it’s a privately-insured health plan that combines Part A and Part B coverage along with additional benefits that vary depending on the plan.
Like any other form of insurance, MSA Plans may come with different options. An MSA plan provider might include coverage for dental or vision, for instance. Plan options will also vary depending on your location, which is why it always pays to shop around.
Step 2: Set up a Medical Savings Account with the plan’s bank
After you have selected an MSA Plan, setting up the actual MSA account is a piece of cake. The nitty-gritty details might vary by provider, but in most instances, it’s possible to have everything set up with a half hour or so.
Your MSA Plan will not be active until your MSA account has been approved and opened by the sponsoring bank.
Step 3: Receive regular deposits from your plan
Every year, your Medicare MSA Plan will deposit your benefit directly into your MSA. At this point, the money becomes yours to spend. As long as you spend the funds on qualified medical expenses, the withdrawals are not taxed.
However, if you use your withdrawals for non-medical expenses, there will be a tax liability. In addition, most plans include a 50% penalty fee for non-qualified withdrawals. For this reason, it’s always more lucrative to stick to qualified expenses.
Step 4: Use your MSA funds to pay for pre-deductible health care costs
One of the best ways to use your MSA account is to pay for any health care costs that come before your plan deductible is met.
Because MSA plans have a higher deductible than other forms of Medicare Advantage, it always pays to stay healthy. But if you fall sick or need emergency care, your MSA can help you meet your deductible without having to dip into your retirement funds.
After your deductible is met, your MSA plan will cover all Medicare-covered services.
Step 5: Your MSA funds will rollover to the next year
The money in your MSA belongs to you, and it’s not going anywhere. If you don’t use the funds in your account, they will roll over from year to year. You can use them for health expenses at any time, or, you can save them up for an unexpected injury or illness.
The more money you have in your MSA, the less likely you will have to dip into your retirement savings to cover the hospital bill.
Step 6: Talk to your Personal Benefits Manager about the Medicare MSA Plan
Choosing a Medicare MSA Plan is the most complicated part of the process, but with a little help from your Personal Benefits Manager, it won’t take more than a few minutes. Once you have a plan selected, the rest of the process is a breeze.
You can click here to schedule a free Medicare MSA consultation, or call us anytime at 800-913-3416.
Wiley Long is founder and president of Medigap Advisors, and is passionate about helping people navigate the confusing waters of Medicare. He is the author of The Medicare Playbook: Designing Your Successful Health Coverage Strategy, a clear and simple explanation so you can make the most of your Medicare coverage.