Medicare MSA Plans are consumer directed Advantage plans. They were created for self-employed people and small employers and are not available in all areas.

By coupling a high deductible health plan with a deposit to your MSA bank account, your initial deductible may be higher, but your total liability for out-of-pocket costs is significantly lower than other Advantage plans.

For people who have significant funds in an HSA or otherwise, this may be a more cost effective and flexible option than other Advantage plans.

Like HSAs:

a) Unused money can accumulate for future use.

b) Money you get and spend on any IRS qualified medical cost isn’t taxed.

Unlike HSAs:

a) Only the plan can make deposits, you can’t.

b) The penalty for non-medical expenses is 50% not 20%.

Like Advantage plans:

a) You pay your Part B premium.

b) Payment of Medicare approved services are deductible

c) You can get dental, vision, or other services.

d) You can use the funds to buy a Part D plan.

Unlike other Advantage plans:

a) Your total out of pocket cost is reduced by a direct deposit into your account.

b) You aren’t limited to a network.

c) You chose the services to add and who provides them.

Like all Medicare plans, doctors and hospitals can’t charge more than Medicare approved amounts. Also, money in your account passes to a beneficiary. If it’s your wife, it’s tax free, for others it’s taxable. You won’t qualify if you have other coverage, are in hospice, or live overseas more than half the year.

MSA Plan deductibles must be between $2,400 and $3,600 for individuals (vs $1,833, for standalone Part A and B).

The MSA plan maximum annual out-of-pocket expense is $4,800 (vs $7,550 for a constrained network and $11,300 for an unconstrained network.)