Welcome to Medicare School Daily, where we help you understand Medicare, save money,
avoid mistakes, and above all else, get the most out of your Medicare benefits. Now, today's
topic is what you need to know about HSA and Medicare. In order to explain HSA, what I'm
going to do is, I'm going to answer three particular questions. Question number one
is this: What is an HSA? An HSA stands for Health Savings Account. Notice I said health
savings account. I didn't say health reimbursement arrangement. That's an HRA, nor did I say
a flexible spending account. All right? And so both of those are plans that you may be
on or eligible for, but I'm only talking about HSA, not health reimbursement arrangements
or flexible spending accounts. All right? Now, what is an HSA? An HSA is a taxed advantage
medical savings account. Money that you can actually set aside for future medical expenses,
and it's a tax advantage. Every HSA has to be a qualified plan, which means one of the
qualifiers is it has to be tied to a high deductible health plan. It’s going to be
a higher deductible than most plans are. And the beauty of them is this: all the money
that you contribute to your HSA is what we would say is pre-tax, meaning it's not subject
to federal income taxes and many times not subject to state income taxes. So you make
these contributions and this pre-tax money. OK? So that's an HSA. Now, the second question
is this: can you contribute to an HSA? What I mean by that is once you go on Medicare,
can you contribute to an HSA? And the answer to that is no you cannot. If you decide to
take Medicare A only or you take Medicare A and B, once you take any form of Medicare,
you cannot contribute to an HSA.
Now, your HSA money is still yours, but no new contributions can go in. So here's where
the problem lies. The question is, is part A required? Many of you are not going to stop
working at 65. You’re not going to take Medicare now. You're not going to take Social
Security now. You're going to wait until you hit your full retirement age. And so the question
is, if you're still working, do you have to take Medicare A? And the answer to that is
no. Now, many of you will hear that if you keep working, you still have to take Medicare
A, and if you do not do that, you're going to be penalized. And folks, that is not true.
You're not required to take Part A as long as you or your spouse are covered by an employer
provided plan, a plan that you're going to stay on. You like the plan, the cost, the
coverage of the plan. And you're not going to take Medicare yet because you're covered
by this employer plan, you or your spouse’s, do you have to take part A? And the answer
is no, you do not. But if you do take Medicare Part A, alright, by itself because you're
fearful that you may get penalized even though you're still working or your spouse is. You
must not stop your contributions to your HSA. The other issue becomes this: once you do
decide to retire, Medicare is going to backdate your part A. So let me just give you a quick
example. Many of you watching this today, your full retirement age is 66 and two months,
meaning you were born in 1955. Some of you, your birthday's in 1956, and your full retirement
age is going to be 66 and four months.
So let's say in my example that you're going to continue to work until full retirement
age, and you're going to retire at full retirement age and you're gonna start taking your Social
Security and you're going to go on Medicare. So here's what's going to happen. Let's say
that you hit full retirement age, let's just call it July 2021, and you're going to retire
and you're going to enroll in Medicare. Now they're going to give you a B date, your Medicare
B, this part here is going to be your retirement date. You actually get to select that, but
they are going to backdate your A date. And so when they backdate, they always back date
to 65 or six months. OK, whatever is sooner. And so in my example, you hit full retirement
age at 66 and two months or four months, in July of 2021, they're going to backdate your
A date six months. So that is going to be 01/01/2021 will be your A date. So we have
different A and B dates, so they backdated six months. And here's my point. You do not
want to make any contributions from this point forward. So that's why you'll read once you
have set a retirement date, be sure to stop making contributions to your HSA six months
prior to that because they're going to backdate your A date. All right? And so this becomes
an issue when you have an HSA. And so that brings us to our final question. How can HSA
funds be used? So once you're retired and now you're on Medicare A and B, how can you
use this money that you've been saving throughout your time during your HSA? Well, first off,
your part B monthly premiums. Right now, Medicare A is free, but B has a premium for most people
that's $144.60 a month. Alright? Now if you're on Social Security, that actually comes out
of your Social Security check. If not, they're going to bill you for that. But the point
is, you can be reimbursed for that or you can actually pay that out of your HSA if indeed
you're being direct billed. So your monthly part B premium $144.60 this year, of course,
that'll probably go up over time. But that money can be paid out of your HSA. Your part
B deductible this year is $198, so whatever the deductible is for the year. Again, your
HSA funds can be used to pay that deductible, which is on an annual basis. Now, Part D plans
are drug plans and those premiums are going to range anywhere from about 13 dollars a
month upwards to maybe 80 dollars or so every month. And if you're on a drug plan, your
HSA can be paying that particular premium. And then, of course, drug plans have deductibles
and they also have copays. And sometimes we hit the donut hole where we have coinsurance.
But any kind of prescription drug costs can be paid through your HSA account as well.
And then that brings us to advantage plans. Now, some of you are going to decide to take
advantage plans; they are called replacement plans. Some of those do have monthly premiums.
Sometimes there's deductibles on the drug plans. They also have copays and coinsurance
because advantage plans are pay as you go. And so if your’re on an advantage plan,
as you have these copays and different expenses, you can use your HSA money for those expenses
as well. And then another nice thing about HSA is miscellaneous medical. What I mean
by that is typically dental or vision or maybe hearing aids or hearing exams, some of those
things that Medicare may not cover. You can use your HSA to pay those costs as well. And
then you see this one here called excess charges. There are some physicians that take Medicare
patients, but they add to the bill, and when they add to the bill that's called a 15 percent
limit on that excess charge. And there are some plans that you're responsible to pay
the excess charges. And so you, again, can use your HSA for excess charges. So as you
can see, most of your medical expenses can be covered by your HSA funds. There is one
item, though, that you cannot pay out of your HSA, and that would be a supplemental plan.
And so many of you will buy supplemental plans, most people today are buying F plans or G
or N plans. But the supplemental premiums cannot be paid out of your HSA, those are
also called Medigap policies. So of all the lists, that is the one item that would be
excluded from you being able to pay from your HSA funds. And so HSAs are wonderful accounts.
And this is how they work once you go on Medicare.