What do MSA plans cover?

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Medicare Medical Savings Account (MSA) plans function as high deductible Medicare Advantage plans with an additional savings account component to help pay your out-of-pocket costs for medical care.

Savings Account

The savings component is similar to Health Savings Account plans from the private marketplace. Your plan deposits money from Medicare into a special savings account that you can use toward your medical expenses before you meet your deductible. Medicare pays the insurance company a set amount at the beginning of each year to offer you this plan. This is not an account that you personally deposit any money in.  Part A and Part B expenses count toward the MSA deductible.

The money in the MSA account can be withdrawn and used for any qualifying medical expense, even if the service or item is not covered by Medicare. Non-Medicare expenses do not count toward the MSA deductible, however. You will not be taxed for withdrawals for qualified medical expenses. You will need to file tax forms 1040 and 8853 each year to report your account withdrawals to the IRS. If you make any withdrawals for non-medical expenses, you will owe income taxes and a 50 percent penalty on the withdrawals. 


MSA accounts function like Medicare Advantage plans. You get the same coverage for Part A and Part B as you would with Original Medicare and can pay more for dental, hearing, or vision coverage if these options are available in your plan. You will have to buy a separate Medicare Part D plan if you want or need prescription drug coverage. With MSA coverage, you are not restricted to a network of providers and can choose the doctor you want to see. These plans cover costs when you reach the out-of-pocket spending limit.

You do not pay premiums for your MSA plan, but you still need to pay your Part A and Part B premiums as usual. Some demonstration plans have cost sharing in the form of coinsurance after you have paid your deductible, in order to have a lower deductible option. These payments only apply until you reach the out-of-pocket limit, after which time the plan will provide full coverage for expenses. If these demonstration plans have a network, you may pay more coinsurance for providers outside of the network.


To enroll in a Medical Savings Account plan, you must fall under one of the following categories:

  • You are eligible for Medicaid
  • You have End-Stage Renal Disease
  • You are currently receiving hospice care
  • You primarily live outside of the United States, for more than half of the year
  • You have health insurance that would cover some of the MSA plan deductible, including benefits from an employer or union group health plan, benefits from TRICARE or Veteran’s Affairs, or if you are a retired federal employee and are part of the Federal Employee Health Benefits Program

If you are interested in a MSA Plan, don’t hesitate to give us a call. We are here to help and can help you determine which coverage is best for your needs and budget.

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Justin Brock

President & CEO of Bobby Brock Insurance