Medical Savings Account (MSA) Plans Present a Unique Investment Opportunity for Medicare Enrollees
If you’ve never heard of a Medical Savings Account, you are not alone. Although MSA Plans have been authorized for quite some time, they really haven’t been available until recently. But that’s about to change, and I’d like you to be the first to know about it.
MSA plans, a type of Medicare Advantage Plan, make it possible to pair personalized coverage with long-term savings. By accepting higher out-of-pocket costs than traditional MA Plans, MSA enrollees can trade unused coverage for flexible, spendable cash.
For individuals who are relatively healthy and not expecting to use their Medicare much, this is a viable way to boost your retirement savings in a big way. Here’s how it works:
MSA Plans (Medical Savings Accounts): Your Money, Your Healthcare, Your Choice
MSA plans are similar to the high deductible health plans required by the more popular Health Savings Accounts (HSA). Essentially, they trade benefits like Part D coverage and out-of-pocket maximums for regular deposits into a personal savings account.
This account belongs to and is controlled by the enrollee. The funds inside can then be used for qualified medical expenses, totally tax free. This puts spending authority back in the hands of the consumer … where we think it belongs.
Not going to spend any of it? Good. The funds will remain in your account, rolling over from year to year, earning interest and dividends.
Q: What’s the Difference Between MSA plans and an HSA plans?
For the most part, MSAs and HSAs are quite similar. They are both tax-deductible savings accounts that can be used to cover qualified medical expenses. In addition, both MSAs and HSAs require enrollment in a high deductible health plan.
The biggest difference between the two is where the contributions are coming from. HSAs can be funded by personal earnings, employer contributions, or both. MSAs, however, only accept contributions from Medicare. In other words, it’s the federal government, not you, that’s covering the deposit.
However, there are some significant tradeoffs with MSAs:
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- MSA Plans have higher deductibles than regular Medicare Advantage Plans. (And therefore, much higher annual out-of-pocket costs).
- Part D prescriptions coverage is not included with MSA plans. (Stand-alone Part D plans can be purchased on the side).
Due to the larger out-of-pocket maximums, MSAs are not for everyone. But for healthy individuals who do not expect to need much coverage, they can be a valuable investment tool.
The Basics of Using Your Medicare Medical Savings Account (MSA)
Fortunately, MSA plans are not complicated to use. Here are the basic steps of starting, growing, and utilizing a Medicare medical savings account:
- Work with your Personal Benefits Manager to find a qualified high deductible MSA plan.
- Every year, Medicare makes a contribution to the account, $2000 or $3000 in 2021, depending on which specific plan you choose.
- Your MSA funds can be spent on qualified medical expenses, like dental, vision, and prescriptions. Or, use your MSA funds on services covered by Part A or B, and it will count against your deductible.
- Didn’t spend your MSA funds? No problem. They’re not going anywhere. They will continue to grow on a tax-deferred basis.
The real beauty of an MSA is that it lets you control how the money is being spent. For people who don’t get sick for years at a time, it’s kind of like getting a refund. Isn’t that how all health insurance should work?
Learn More About MSA Plans: Medicare’s Underused Saving Strategy
Taking advantage of an MSA plan can create big savings in a short period of time. In addition, they give the enrollee more complete control of the way their healthcare dollars are being spent.
I started MediGap Advisors for this very reason … to put more control back in the hands of the healthcare consumer. If you have questions about MSA accounts or would like help signing up, give us a call. You can also visit our website to get a Free Quote.
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.