How Do Medicare MSA Plans Work, and Do I Need One?
Until last year, MSAs were a rare breed, with availability being limited to Wisconsin (Security Health Plan and Network Health) and parts of New York and Vermont (MVP Health Care).
It makes sense that in early 2018, only 5,000 of the 19 million Medicare Advantage enrollees were in MSA programs because the MSA simply was not widely available (CNBC).
However, in October 2018, enrollment opened for the brand new Lasso Healthcare MSA, and it changed the game by offering this MSA plan in 17 states! As of 2019, it’s available in 26 states plus the District of Columbia.
Now that so many people across the United States have access to the Medicare MSA, many are wondering how it works and if an MSA could be right for them. Medicare Allies to the rescue!
What Is a Medicare MSA?
The Centers for Medicare & Medicaid Services has dictated exactly what an MSA is, and it has even set some boundaries that all MSA providers must follow.
A Medicare Medical Savings Account (MSA) plan is a type of Medicare Advantage plan that combines high-deductible health coverage with an annually funded medical savings account.
That medical savings account can be used to initially help pay for health care, and after it’s used up, the member is responsible for all out-of-pocket costs until they reach their deductible.
All MSAs must follow these guidelines:
- High-deductible health coverage
- Money deposited into a medical savings account each year
- Monies spent on Qualified Medical Expenses are tax-free
- $0 premium
- No networks – see any Medicare-participating doctor
- Drug coverage is not to be included – you’ll need a separate Medicare Part D drug plan
Which Companies Sell MSA Plans?
There are not very many companies that currently sell a Medicare MSA. If you live in Wisconsin, you have access to Security Health Plan and Network Health, and if you live in New York or Vermont, you can consider MVP Health Care.
For the majority of those living in the United States, you have access to Lasso Healthcare.
For the 2019 Medicare Open Enrollment Period (for January 1, 2020 effective dates), Lasso Healthcare’s MSA is available in the following states plus the District of Columbia: AZ, AR, DE, GA, HI, IL, IN, KS, KY, LA, MD, MN, MS, MT, NC, ND, NM, NV, OH, PA, RI, SC, SD, TX, UT, and WY.
MSA Plan Basics
An MSA plan has several basic components:
- $0 premium
- High deductible
- No copays or coinsurance
- Annually funded medical savings account
- No drug coverage included
- No networks
An MSA gives you freedom to see any Medicare-participating doctor you want – no matter where you travel.
How Can I Use My MSA?
After you enroll in your Medicare MSA, you will receive a deposit into your medical savings account. That money can be used for Qualified Medical Expenses (these are outlined by the IRS).
If the money is used for a Qualified Medical Expense that is Medicare-approved, such as a doctor visit, it will count towards your deductible.
If you use your deposit for Qualified Medical Expenses that are not Medicare-approved, such as a hearing aid, it will not count towards your deductible.
Finally, if you use your deposit for things that are not Qualified Medical Expenses and they are not approved by Medicare, you’ll be penalized and taxed 50%.
In other words – only use your MSA for Qualified Medical Expenses!
MSA Plan Example
Because the Lasso Healthcare MSA is so widely available, we’ll use its 2020 plan structure as our example.
The 2020 Lasso Healthcare MSA plan has the following features:
- $0 premium
- $3,240 annual deposit into your account
- $7,400, $8,400, or $9,400 deductible depending on which county you’re in
- No copays
- No networks
- No drug coverage
Using this example, let’s say you live in central Illinois. Here, the deductible is $7,400. This means that after you use your $3,240 deposit (if you go through it all), you will be responsible for $4,160.
After you reach your plan deductible, Lasso Healthcare will pay 100% of Medicare-approved medical expenses.
You may choose to add a Hospital Indemnity Plan (HIP), which would help cover some or all of that $4,160 responsibility. Lasso Healthcare is now offering a HIP in select states that works with an MSA to offset your potential out-of-pocket risks.
MSA Coverage – Health and Prescription Drugs
An MSA is required to cover all Medicare-approved expenses after you reach your deductible. However, you have the option to use your deposit for medical items and services that aren’t covered by Medicare – it just won’t count towards your deductible.
For example, you can use the $3,240 annual deposit from Lasso Healthcare for things like vision exams, dental work, hearing screenings, a chiropractor – the list goes on! You just cannot count those expenses towards your high deductible.
MSAs, according to CMS regulations, cannot offer prescription drug coverage. While many see this as a con, our team at Medicare Allies actually prefers this!
This gives you the freedom to hand-select a Medicare Part D drug plan that actually fits your needs. We can run a drug comparison using your exact prescriptions and the pharmacy you like to go to, and we’ll find the best plan for the best price.
With other Medicare Advantage plans that have drug coverage included… you get what you get. And sometimes, the drug coverage doesn’t fit your needs.
- An MSA covers all Medicare-approved expenses when you reach your deductible.
- You have the freedom to use your deposit for other medical expenses that Medicare normally does not cover.
- You will need to sign up for a separate Medicare Part D drug plan.
MSA Enrollment and Disenrollment
There are two times you can enroll in an MSA plan: during AEP and ICEP. And there is one time you can disenroll from an MSA Plan: during AEP.
More acronyms?! We know. But stay with us, because it’s really simple.
AEP is Medicare’s Annual Enrollment Period (also called Medicare Open Enrollment), and it lasts from October 15-December 7 every year.
ICEP stands for Initial Coverage Election Period, which is typically when you’re turning 65 and are first eligible for Medicare.
In sum, you can enroll in a Medicare MSA between October 15-December 7 each year and/or when you are first eligible to sign up for Medicare.
If you want to get out your MSA plan – or disenroll from it – you can only do that during the AEP, or from October 15-December 7 each year.
With other Medicare Advantage plans, you have this special window between January 1-March 31 of each year (Medicare Advantage Open Enrollment Period, or MA OEP), where you can get out of your plan, but the MSA is a rare exception.
In sum, you can only get out of your MSA plan between October 15-December 7 each year.
Who Is Eligible for an MSA?
There is a list of criteria provided by CMS – if all of these are true, you are eligible for an MSA:
- Be Medicare-eligible
- Live in the Lasso Healthcare MSA service area
- Reside in the U.S. for 183 days or more during the year
- Not have any other coverage that would cover the MSA plan deductible (including employer benefits, TRICARE, the VA, or FEHBP)
- Not be eligible for Medicaid
- Not be receiving Medicare hospice benefits
- Not have end-stage renal disease, unless you were enrolled with an MA plan that left Medicare and haven’t yet joined another MA plan
Who Needs an MSA?
In our experience, there are few categories of people who are great candidates for an MSA:
- You’re turning 65 – you have the most potential to accumulate funds because you have time on your side!
- You’re generally healthy – there’s less chance of you spending any money out-of-pocket.
- You have a controlled chronic condition – you may not qualify for a Medicare Supplement, but you’re otherwise healthy.
- You’re financially able to handle the difference between the deposit and the deductible – if you had a bad health year, you wouldn’t be in a financial crisis.
- You receive some kind of reimbursement or stipend from your employer for post-65 healthcare – use that reimbursement to offset the risk of out-of-pocket costs between your deposit and deductible!
MSAs have no medical underwriting, so no matter what conditions you have – except for End-Stage Renal Disease (ESRD) – you will be approved for the plan.
This is excellent news for those who may have a Medicare Supplement with expensive premiums, but they can’t switch companies because they can’t pass underwriting. There are tons of quirky conditions that can prevent you from passing medical underwriting, such as diabetes with more than 50 units of insulin, diabetes with heart complications, and COPD.
In our experience, these people are excellent candidates for a product like a Medicare MSA.
If you’re unhealthy and are not financially secure, the MSA is probably not the right product for you.
Get MSA Help
Interested in learning more about the Medicare MSA? Get in touch with us! Call us at 833-801-7999 to talk with Luke or Sarah, our wonderful agents! You can also fill out our Get a Quote form if you prefer.
Even if the MSA isn’t the best fit for you, we are happy to make other recommendations that are personalized to you. We offer Medicare Advantage and Medicare Supplement products from the most competitive companies in the United States, and we’d love to help you increase your benefits and save you money.
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