Two groups of people are most likely to benefit if Medicare beneficiaries are able to contribute to these tax-advantaged accounts, according to Gretchen Jacobson, associate director, program on Medicare policy at the Kaiser Family Foundation.
1. Older people who are still working and use Medicare as a secondary payer. This assumes your workplace plan is a high-deductible plan with an HSA, and you turned 65 and enrolled in Medicare.
2. People who want to enroll in Medicare Advantage with a Medicare
medical savings account
: Like HSAs, MSAs accrue interest free of taxes and beneficiaries can take tax-free withdrawals for medical costs. Medicare funds the account each year; account holders aren't allowed to make contributions.
The amount that goes into your MSA is determined by the insurer providing your coverage and may vary year to year.
People in MSAs would be allowed to contribute to the tax-free accounts, subject to the annual HSA contribution limits, according to the U.S. Department of Health and Human Services. They would also have a one-time opportunity to rollover funds from their private HSAs to their MSAs.
Participants in these plans won't be able to buy Medigap, a form of supplemental coverage that helps pay for deductibles and copayments that original Medicare won't cover.
Of the 20.4 million people enrolled in Medicare Advantage last year, about 6,000 are in programs that use an MSA, according to Jacobson. The budget proposal would also open up those MSAs so that Medicare enrollees can fund them.
"This isn't necessarily for your average Medicare beneficiary," said Jacobson. "It fits the higher income profile of Medicare beneficiaries with extra income."
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