Health Savings Account (HSA) and Medicare

Once you enroll in Medicare, you are no longer eligible to contribute pre-tax money to a health savings account (HSA). You’ll have to pay a penalty on any new money you put into the account. But you can use money you’ve already put into your HSA to pay for some Medicare costs.

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Written by
Terry Turner
Terry Turner
Senior Financial Writer and Financial Wellness Facilitator
Terry Turner has more than 35 years of journalism experience, including covering benefits, spending and congressional action on federal programs such as Social Security and Medicare. He is a Certified Financial Wellness Facilitator through the National Wellness Institute and the Foundation for Financial Wellness and a member of the Association for Financial Counseling & Planning Education (AFCPE®).
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Edited By
Lee Williams
Lee Williams
Senior Financial Editor
Lee Williams is a professional writer, editor and content strategist with 10 years of professional experience working for global and nationally recognized brands. He has contributed to Forbes, The Huffington Post, SUCCESS Magazine, AskMen.com, Electric Literature and The Wall Street Journal. His career also includes ghostwriting for Fortune 500 CEOs and published authors.
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Reviewed By
Brian Hickey, CLU®, CLTC®, FLMI
Brian Hickey, CLU®, CLTC®, FLMI
Vice President of Insuractive
Brian Hickey is vice president of Insuractive, an Omaha-based company providing direct-to-consumer Medicare plans, life insurance and wealth protection to individuals. With 24 years’ experiencein Medicare, long-term care, life insurance and wealth protection, Brian leads and develops Insuractive’s strategic initiatives with a focus on direct-to-consumeroptions for insurance information and solutions.
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Published: August 26, 2021
Updated: March 1, 2023
4 min read time
This page features 5 Cited Research Articles

Fact CheckedCite UsWhy Trust RetireGuide.com

How Does Medicare Work With an HSA?

A health savings account (HSA) allows you to put money away for medical expenses. The money you put into your HSA is pre-tax — meaning it doesn’t count toward your taxable income.

To qualify for an HSA, you must be enrolled in a high-deductible health plan and cannot have any other health insurance. So once you enroll in Medicare — considered another health insurance plan — you lose this tax advantage.

You can even face a tax penalty if you continue putting money in your HSA. But you can spend money from the account on certain Medicare out-of-pocket costs.

Medicare and HSA Basics

Medicare and HSA eligibility: Once you enroll in Medicare, you can no longer contribute to your HSA. But you don’t have to enroll in Medicare when you turn 65 so long as you have another health plan. As long as you are not enrolled in Medicare, you remain eligible to contribute to your HSA.
Medicare and HSA contributions: If you enroll in Medicare when you’re first eligible, you can still contribute during the months you were eligible up until the month when you turn 65. Say your birthday is April 10. You can contribute during January, February and March.
Medicare and HSA distributions: You can still use your HSA money for certain Medicare out-of-pocket expenses. The money you spend on qualified medical expenses will be a tax-free distribution. Qualified expenses include:

Medicare Part A & Part B deductibles

Medicare Part B premiums

Medicare Advantage plan premiums

Medicare Part D drug plan premiums

Medigap plan premiums (but you must pay taxes on the money for these premium payments)

Copayments and coinsurance

Dental expenses

Insulin and diabetic supplies

Over-the-counter medications

Prescription drugs

Vision expenses
Delaying Medicare enrollment in favor of HSA: As long as you still have a qualified health plan, you won’t face a late enrollment penalty from Medicare. For instance, if you keep your employer or spouse’s employer health plan, you can continue contributing to your HSA until you enroll in Medicare. If you drop your plan and delay enrolling in Medicare, you can face a late enrollment penalty from Medicare.

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Can One Spouse Have Medicare and the Other Contribute to an HSA?

Receiving Medicare coverage does not disqualify your spouse from an HSA.

If your spouse is HSA-eligible, you can enroll in Medicare and your spouse can enroll in or continue in their HSA plan. You, your spouse or anyone for that matter can make contributions into their HSA up to the family maximum.

This lets some couples build tax-free savings in their health savings account that they can use during retirement. These couples can sometimes sock away tax-free income contributions for years after the older spouse retires and enrolls in Medicare.

Did You Know?

Your yearly maximum contribution to a health savings account in 2022 is $3,650 for an individual with a high-deductible health plan (HDHP) and $7,300 if you have a family HDHP. But if you are 55 or older, you can make an additional “catch-up” contribution of $1,000.

Source: Internal Revenue Service

You can continue to make post-tax contributions to your spouse’s HSA — meaning you must pay income tax on the money you contribute — and can do so through an automatic payroll deduction plan that puts money directly into their HSA.

Your spouse can even deduct your contributions from their income tax return — or if you file jointly, for your joint return.

Does Medicare Have Its Own Version of an HSA?

Medicare offers its own version of an HSA called Medicare Medical Savings Account (MSA) plans. MSA plans are sold through private insurance companies.

The plans must be used with a high-deductible Medicare Advantage plan, which replaces Medicare Part A and Part B and are also sold through private insurers. These plans only kick in to cover your medical bills after you reach a high yearly deductible.

Money you contribute to an MSA can cover dental, vision, hearing and long-term care not covered by Medicare. They do not cover Medicare Part D prescription drug plans.

Last Modified: March 1, 2023