How Your HSA Can Reimburse You for Medicare Premiums Paid

Even if your Medicare premiums are automatically deducted from your Social Security check, you can take tax-free withdrawals from a health savings account to reimburse yourself for them.

Concept art of a piggy bank with HSA written on it next to a jar of money
(Image credit: Getty Images)

Question: You told another reader that people can’t make new contributions to a health savings account once they enroll in Medicare, but they can withdraw the money tax-free from the account to pay Medicare premiums. If I have my Medicare payments deducted directly from my Social Security benefits, can I still withdraw money from my HSA for those expenses? And do I need to withdraw the money right away, or can I keep the money growing in the HSA and withdraw it for those premiums sometime in the future?

Answer: Even though you have your Medicare premiums paid directly out of your Social Security benefits, you can withdraw money tax-free from your HSA to reimburse yourself for those expenses. After you turn 65, you can use HSA money tax-free to pay premiums for Medicare parts B and D and Medicare Advantage plans (but not premiums for Medicare supplement policies), in addition to paying for other out-of-pocket medical expenses.

And there’s no time limit for withdrawing money from an HSA to pay for those expenses. You can keep the money growing tax-deferred in the account, then withdraw it tax-free at any time in the future to reimburse yourself for any eligible expenses you have incurred since you opened the HSA. So if you’ve had an HSA for several years and didn’t realize you could withdraw money tax-free for Medicare premiums, you could reimburse yourself for all of those premiums at any time. You just need to keep receipts showing that you paid for eligible expenses. And you can’t withdraw money for expenses you incurred before you opened up the HSA. “When reimbursing himself from the HSA, it’s important that he maintains proof of payment and documentation that the expenses were eligible, in the event of an audit (although he does not need to submit any receipts to be reimbursed),” says Begonya Klumb, head of HSAs for Fidelity Health Care Group.

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For more information about HSA-eligible expenses, see IRS Publication 969, Health Savings Accounts. Also see 10 Myths About Health Savings Accounts for more information about how these accounts work.

Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.