What is the Relationship Between a Health Savings Account and Medicare?

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  • Written By: Jodee Redmond
  • Edited By: Bronwyn Harris
  • Last Modified Date: 21 August 2018
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People living in the United States can combine a health savings account and Medicare coverage to pay for their medical care. Medicare offers a high-deductible health insurance plan that is used in conjunction with a medical savings account to pay for these expenses. Under the plan, money is deposited on the member's behalf into a savings account. The money in the account grows on a tax-free basis until the funds are withdrawn to pay for medical expenses.

The first step in setting up this type of plan is to enroll in a Medicare plan with a high deductible. The deductible is the amount that the plan member will have to pay out of pocket before the health savings account and Medicare will pay for any medical bills. Once the deductible level has been reached, the money in the health savings account is withdrawn and used to pay for medical care.


The amount of the deductible varies, depending on the plan chosen. People who have Medicare Part A or Part B are eligible to join a health savings accounts and Medicare plan if they wish. This option is not available to those individuals who have coverage through a group medical plan or a federal employees benefits package. People who have end-stage renal disease or are receiving hospice care are also not eligible for this type of health insurance plan. Anyone who wishes to be covered under this option must reside in the United States for at least 183 days per year.

If the money deposited to the health savings account and Medicare plan is exhausted during the year, the plan member will be required to pay for any additional medical expenses personally until the deductible level has been met again. When a plan member is paying for medical services until the annual deductible is met, doctors and other health care professionals must ensure that the cost of services does not exceed the amount approved by Medicare. Once the deductible has been met again, the health savings account and Medicare plan will pay for services covered under Medicare.

Any funds remaining in the health savings account at the end of the year stay in the account. They accumulate interest until withdrawn to pay for medical care. A person who chooses a health savings account and Medicare plan for their needs does not have to pay tax on the funds withdrawn from the health savings account if they are used to pay for medical care.


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