What you should know about Medicare and your Health Savings Account

Millions of Americans who work choose to put their money in a health savings account (HSA).  An HSA is often referred to as a triple tax-advantaged account: deposits are pre-tax, balances can grow tax-free, and withdrawals for qualified medical expenses are exempt from taxes. 

If you currently have an HSA through your employer-provided health benefits, there are a few important considerations to understand. While you can keep your HSA and its balance when you go on Medicare, you can no longer make contributions to your HSA when you enroll in any part of Medicare. 

In fact, when you enroll in Part A, your coverage will be retroactively effective 6 months from when you sign up. So you should stop making contributions to your HSA 6 months before you enroll in Part A and / or Part B. Some people who have strong employer-provided coverage will choose to defer Medicare enrollment if they want to continue contributing to their HSA. 

The good news is that if you have funds in an HSA and join Medicare, you are allowed to use up all the money in the current account to pay for expenses such as Medicare copayments, deductibles and premiums. Expenses an already funded HSA account can contribute to include:

- Medicare Part B, C and D premiums

- Deductibles for all parts of Medicare

- Dental expenses

- Vision expenses

- Hearing expenses

- Over-the-counter medicine

It is important to note that all the money you contribute to HSA is considered pre-tax dollars. However, you may be subject to tax penalties if your HSA contributions and your Medicare enrollment overlap. Our advisors at Chapter can help you break down the timelines to avoid this risk.  

If you need any other information, give us a give us a call at (855) 900-CHAP. It would be a privilege for our team to serve you. 

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Ari Parker is Chapter’s lead Medicare advisor, Chapter’s co-founder and a Stanford trained lawyer. You can reach out to him at [email protected].