A Medicare Medical Savings Account (MSA) plan is a Medicare private health plan that differs from other private health plans in four ways:
1. It has a very high-deductible:
In most cases the plan will only pay for covered Part A and B services once you have spent a certain amount out-of-pocket (reached your deductible). MSA plan deductibles tend to be very high, as much as $10,600 in 2015. Once you reach your deductible, the plan will generally cover all or most of the costs of Medicare-covered medical and hospital services (Part A and Part B services).
Note: if you enroll in an MSA after January 1, your yearly deductible will be pro-rated to the number of months left in the year. For example, if you enroll in an MSA with a yearly deductible of $6,000 starting September 1, your deductible will be $2,000 (4/12 of the yearly deductible).
2. It cannot offer Medicare drug coverage (Part D):
If you are in an MSA plan and want Medicare drug coverage, you must join a stand-alone drug plan (PDP).
3. It has a Medical Savings Account:
The plan will deposit a certain amount of money (that it gets from Medicare) into a Medical Savings Account (MSA) at a bank chosen by the plan. The amount that the plan deposits into your account will generally be much lower than your deductible so you will have high out-of-pocket costs to pay until you meet your deductible. The deposit will not be taxed as long as you use it to pay for “qualified medical expenses.” To avoid tax deductions from the MSA account for health care expenses, you must report these expenses to the Internal Revenue Service (IRS) in your taxes.
4. You can only enroll at certain times:
When you first sign up for Part B
During Fall Open Enrollment (October 15 to December 7)