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Health Care & Insurance

How Health Savings Accounts Work With Medicare

Keep your HSA in mind when making Medicare sign-up decisions.

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A health savings account can be a great source of tax-free money for medical expenses and some premiums, even after you’re on Medicare.

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You can use HSA money for out-of-pocket costs, such as co-payments and deductibles for medical care and prescription drugs; vision and dental care; and a portion of qualified long-term-care premiums. You can even use HSA money to pay premiums for Medicare Part B, Part D prescription-drug coverage and Medicare Advantage plans (but not medigap premiums). If your Medicare premiums are automatically deducted from your Social Security benefits, you can reimburse yourself for those expenses with money from your HSA. For a list of eligible expenses, see IRS Publication 502: Medical and Dental Expenses.

Keep your HSA in mind when making Medicare sign-up decisions. You can continue making pretax HSA contributions even after age 65 if you’re still working and decide to delay taking Medicare. To qualify, you must have a high-deductible health insurance policy ($1,300 for individual coverage or $2,600 for family coverage in 2015) and must not have signed up for either Medicare Part A or Part B. Some people who are still working delay signing up for Medicare (even premium-free Part A) so they can make HSA contributions, especially if their boss kicks in some money to their account. When you sign up for Medicare after leaving your job, you must stop making HSA contributions.

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