Although they’ve been around for almost 2 decades, a lot of people still don’t know about the Medicare MSA Plan. This high-deductible form of Medicare Advantage allows beneficiaries to open and operate a Medical Savings Account, unlocking a new tax-advantaged way to save for retirement. Learn all about the Medicare MSA Plans Pros & Cons
The Pros & Cons of Medicare MSA Plans in 2021
Here are the most critical MSA Plans Pros & Cons:
Pro: MSA Plans Have a $0 Monthly Premium
Because of their high-deductible structure, MSA Plans are required to have a $0 monthly premium. For this reason, switching to an MSA can lead to an immediate and significant drop in monthly medical expenses.
Pro: MSA Plans Have No Provider Network
With an MSA Plan, you can use any doctor or medical provider that accepts Original Medicare. This is an attractive option for people who split their time between different parts of the country.
Pro: The Medical Savings Account is Tax-Advantaged
The Medicare MSA Plan comes with a Medical Savings Account, or MSA. These accounts are funded by your Medicare plan but are 100% owned and operated by the beneficiary. This gives the account owner more control of how their Medicare dollars are being spent, as well as the opportunity to earn significant dividends over time.
Pro: MSA Plans Encourage and Reward a Healthy Lifestyle
Because the money in your MSA count is allowed to grow on a tax-deferred basis, there is a unique incentive to use as little of it as possible. By staying healthy and avoiding unnecessary medical costs, it’s possible to earn big dividends in the long term. This is why a well-funded MSA is a recommended addition to any long-term retirement plan.
Con: The Medicare MSA Plan has a Higher Deductible
Like other forms of Medicare Advantage, your deductible will vary depending on your specific plan. But in general, the MSA plan deductible is significantly higher than it is with other plans. Because the deductible needs to be met before Coverage begins, this can lead to a much higher out-of-pocket risk for sudden or unexpected medical events.
Con: The Medical Savings Account Can Only Be Used for Qualified Medical Expenses
As long as you use your MSA funds on qualified medical expenses, the funds will remain tax-free. However, if you withdraw MSA money for something like groceries, clothing, or a vacation, you are subject to a 50% tax penalty.
Qualified Medical Costs include things like:
- Pre-deductible medical costs
- Hearing tests and hearing aids
- Vision services, prescription glasses, and LASIK
- Part D prescription drug plans
- Over-the-counter medications
Con: You Can Only Switch to the MSA Plan During Medicare Open Enrollment
If you’re enrolling in Medicare for the first time, you can sign up for the MSA Plan right away during your Initial Enrollment Period.
But if you’re already in Medicare, the only time to switch to Medicare Advantage is during the Open Enrollment Period, which lasts from October 15th to December 7th every year.
Learn More About the 2021 Medicare MSA Plan
Switching to Medicare Advantage can lead to quick reductions in your monthly expenses, but it’s not going to be the right fit for everybody. Fortunately, there are multiple options on the table when it comes to supplementing your Medicare.
If you’re looking to make a change in your Medicare plan, MediGap Advisors can help. Call 800-913-3416 to get started, or click here to schedule a consultation.
Here are some additional articles on Medicare MSA plans: The Next Big Thing in Medicare: Medicare MSA Plans | Should You Switch to a Medicare MSA Plan This Fall?
Here are some additional pages related to this article: Medicare Medical Savings Account Information | Medicare: How to Make Sure You Have the Coverage You Need
Tom Lockwood is a Personal Benefits Manager at MediGap Advisors. Tom has a passion for bringing clarity to those confused about Medicare. He is an authority on Medicare, Medicare supplement plans, Medicare Advantage plans, and Part D prescription drug plans. Read more about Tom on his Bio page.