Does Medicare Really Contribute to an MSA?

Does Medicare Really Contribute to an MSA?

If you’ve read our recent articles about the Medicare MSA, you know that it comes with a funded savings account. You read that right – free money given to you for qualified medical expenses. If you’re a researcher and like to understand the inner workings of everything, you probably have some questions.

First of all, where does that MSA money come from? How is the product $0 premium, too? Is all of this too good to be true? What’s the catch, anyway?

We hear you! If you’re used to health insurance from the marketplace, you’re used to seeing premiums over $500 per month – maybe even a lot higher than that. It’s not often you come across a health insurance product that costs you nothing to have while also giving you money for medical bills.

Here are some answers.

Where Does the Medicare MSA Deposit Come From?

The Medicare Medical Savings Account technically falls under the umbrella of “Medicare Advantage” products. It’s nothing like regular Medicare Advantage products, though – it has no networks and comes with a savings account attached.

However, because it’s an alternative to Original Medicare, the government says, “Ooh! You’re willing to take on the risk of these individuals? Be my guest. Here’s some money for you to insure them, but if they cost you more than this, it’s on you.”

In fact, all Medicare Advantage products are funded by the government when you really look at them. We explain this in more detail here: How Can Medicare Advantage Plans Have $0 Monthly Premiums?

But here’s the gist: The Centers for Medicare & Medicaid Services (CMS) pays a set amount every month to the insurance carrier on your behalf. That amount is based on the county.

Why Does the Government Give Money to the Medicare MSA Insurance Company?

Ultimately, CMS believes it’s cheaper to pay a private insurance carrier to insure you than it is for you to be on Medicare. That’s also why there seems to be this big push from CMS to get everyone on a Medicare Advantage plan.

Keep in mind that with the Medicare MSA or any Medicare Advantage plan, you still must pay the Medicare Part B premium ($135.50 in 2019).

Humana, a popular Medicare Advantage carrier, says that if the plan spends less than the flat fee it gets from CMS, it can pass that savings along to members by being $0 premium or by providing extra benefits.

In the case of the Medicare MSA, that money is passed to enrollees by way of a funded savings account that you can use for any qualified medical expenses. Plus, it’s also $0 premium.

Historically, the Medicare MSA has been funded with an annual deposit of about $2,500, though that amount can change each year.

What Can You Use the Free Money For?

The annual deposit that comes with the Medicare MSA can be used for qualified medical expenses. Those are laid out by the IRS in Publication 502.

If you scroll through that document, you may notice that a lot of expenses are listed that Original Medicare doesn’t cover, including:

  • Acupuncture
  • Chiropractor
  • Contact Lenses
  • Dental Treatments
  • Eye Exams and Eyeglasses
  • Hearing Aids
  • Prescription drug plan (Part D) copays
  • $50 per person for lodging (say you have to travel out of town to see a specialist – you can claim up to $50 per person for any fees you incur if the lodging is essential to medical care)

You can use your Medicare MSA funds to pay for any of these items along with any services or items that Original Medicare covers.

The only difference is that expenses that Original Medicare doesn’t cover won’t count towards your deductible.

Is There a Catch with the Medicare MSA?

The Medicare Medical Savings Account isn’t a new concept – it’s been around for many years. However, it hasn’t been available for most individuals, because there weren’t many insurance companies offering it.

Starting in 2018, a new company called Lasso Healthcare came out with a Medicare MSA that is available in more states than ever before, including Illinois.

We’ve never had this option in central Illinois before, which is why you may have never heard of it.

Is there a catch? No, there isn’t! It’s exactly as it sounds. Here are the highlights:

  • $0 premium
  • Annual deposit you can use for any qualified medical expenses
  • High deductible (historically $6,700 in Macon county)
  • No networks – see any doctor that accepts Medicare

You can even use the deposit given to you for your Part D prescription drug plan copays.

If you’re healthy or are just sick and tired of paying out a ton of money in premium, the Medicare MSA is a real opportunity to start accumulating funds.

If you don’t use the money in the account, it rolls over to the next year, and when you die, that money goes to your beneficiary. The money is always yours – it’s not "use it or lose it."

You can even start earning interest on the money if the account balance is over $2,000.

It just keeps getting better, doesn’t it?! We love this product, and agents in our office are actually choosing the Medicare MSA as they turn 65. That’s a true testament to how great this product is, especially since we know the ins and outs of all available products!

Are you interested in learning more about the Medicare MSA? Whether you’re turning 65 soon or want to see how it compares to your current coverage, we can help. Give us a call at 217-423-8000 to learn more!

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Disclaimer: We do not offer every plan available in your area. Currently we represent 4 organizations which offer 41 products in your area. Please contact, 1‑800‑MEDICARE, or your local State Health Insurance Program to get information on all of your options.