Medicare Medical Savings Accounts
The Medicare Medical Savings Account (MSA) is possibly one of Medicare’s best kept secrets. According to a recent CNBC article, if you are 65 or older, relatively healthy, and have a high-deductible Medicare Advantage plan, you may qualify for an MSA. Funds in an MSA account accrue interest and grow tax-free. Funds can then be withdrawn for qualified medical expenses.
Despite all the benefits of an MSA, there are currently only 5,000 participants—out of the approximately 19 million Medicare Advantage enrollees. The main reason so many seniors avoid MSAs is the requirement of a high deductible plan. Traditional health care coverage does not use a high deductible plan and many are apprehensive about making a change. Paying out of pocket also makes seniors nervous, especially if they are relatively healthy and may not hit their deductible. MVP Health Care, one of the few firm’s that offers an MSA, has an $8,000 deductible for 2018. Further, this does not include prescription drug coverage so one would need Medicare Part D to cover that.
Despite the high deductible, there is one major benefit to MSAs: Medicare pays your insurance company to fund your MSA. This is called “seeding” your account. Unlike health savings accounts, Medicare participants cannot put their own funds into an MSA. Seed funds roll over from year to year. President Trump has proposed allowing seniors to contribute to an MSA under the same rules for health savings account contributions. While this may make MSAs more popular, seniors will still need to accept a high deductible.