New Medicare Medical Savings Accounts (MSA) Growing in Availability and Popularity
Medicare insurance is confusing, complex and constantly changing. As of September 2019, there were almost 21 million Medicare Advantage enrollees, about one in three of the 62 million Medicare beneficiaries. However, according to CMS enrollment data, less than 7,000 have a Medicare Medical Savings Account plan. But that number is about to change in a big way.
Thanks to an insurance company named Lasso Healthcare, millions of American seniors across 26 states will now be able to evaluate and choose this very different approach to managing healthcare expenses.
What is an MSA?
- Highly Regulated Plan Created by Center for Medicare & Medicare Services (CMS)
- Financial Investment Tool with Medicare Advantage health plan
- Consumer-Directed Medicare Benefits
- Perfect for Using Accumulated HSA Balances
An MSA is similar to the popular health savings account (HSA). However, instead of your client contributing tax-free to their account, a lump sum is deposited annually into a medical spending account by the plan via Medicare. For Lasso MSA enrollees, the amount deposited in 2020 will be $3,240. Members have the flexibility to spend their balance on qualified health expenses (hospital and medical costs, dental, vision, and long-term care to name a few), or save it for future costs.
In addition to the savings account, Lasso MSA members are enrolled in a high-deductible health plan, which means nothing is covered until that deductible is met. But statistics show that the vast majority of Medicare beneficiaries will have significant MSA deposit money left over at the end of the year. So, the real value of an MSA is that any money not used from that annual deposit will roll over year after year. And it grows tax-free and withdrawals are also tax-free when used for qualified medical expenses.
While MSA plans can’t cover prescription drug costs, MSA enrollees are able to shop and choose the one best suited for their needs from the dozens of stand-alone Part D prescription drug plans.
Who Should be Most Attracted to Medicare MSA plans?
Millions of healthy and health-conscious seniors who are aware that the need to save for future healthcare costs is greater than to be overprotected for the near term. The Center for Medicare & Medicaid Services wants people to be more accountable and responsible in what they spend on healthcare – and to entice them with upfront monies that can be saved and invested tax free to pay for the inevitable future medical expenses.
Health Savings Accounts (HSAs) a Bellwether for Growth of Medicare MSA Plans
At the end of 2018, approximately 25 million non-Medicare Americans had Health Savings Accounts (HSA) along with a high-deductible health plan. According to many financial advisors, the “triple tax-advantaged” funds in the HSAs compete favorably with IRAs and 401k plans as retirement investment vehicles. But once enrolled in any part of Medicare, the ability to contribute additional funds to an HSA ends.
The rapid acceptance of employer sponsored HSA plans bodes very well for the growth of Medicare Medical Savings Accounts (MSA). In 2018, MSA plans were only available in portions of two states (New York & Wisconsin). The Lasso Healthcare MSA launched in 17 additional states in 2019 and, for 2020, Lasso is expanding the MSA offering to millions of Medicare beneficiaries living in 26 states and Washington DC.
Other Attractive Reasons to Like Medicare MSA plans
- $0 Monthly Premium
- No Provider Networks to Deal With
- Pay Only the Medicare Approved Amounts for Services
By law, MSA plans cannot charge a monthly premium and they cannot limit Members to using a network of doctors, hospitals or other healthcare providers. This combination of $0 premium and the ability to see any Medicare provider in any location seems to take the most attractive elements of many Medicare Advantage plans as well as the “freedom of choice” offered by Medigap plans. And the cost for Medicare Parts A & B services is always at the lower of the actual cost or the Medicare approved amount.
Additionally, to support the wise use of preventative care services, the Lasso MSA plan offers an additional $250 in gift cards for completing (optional) an annual wellness visit, a health survey and screening lab tests.
The High Deductible Concern About MSA Plans
- What If There is an Accident or Serious Illness?
- How Much is the Deductible?
- Can I Insure Against Paying the Deductible?
While it takes a serious accident or illness to meet the deductible, the annual deposit already accounts for a chunk out of that threshold. The funds saved in the MSA should be used to pay for costs related to Medicare Parts A and B but can be used tax-free for hundreds of Qualified Medical Expenses (QME). The deductible amount various by region but will be either $7,400; $8,400; or $9,400 during 2020.
Once the deductible is met, all Medicare hospital and medical expenses are 100% covered until the following calendar year, when the deductible is reset, and a new deposit is received.
The difference between the Deductible and the Deposit is referred to as the Member Responsibility. For Region 1 enrollees in the Lasso MSA, the Member Responsibility would be $7,400 less $3,240 = $4,160. While it may take two or three years of unused deposits to save an amount equal to the Member Responsibility, Lasso Healthcare also offers a companion hospital indemnity plan (HIP) should an adverse health event happen in the first few years before the MSA balance is sufficient to cover the Member Responsibility.
Closing Thoughts About Medicare
Many experts predict that the rising costs of healthcare for the enormous Baby Boom generation with greater longevity will cripple the U.S. federal budget that pays for Medicare, Social Security and Medicaid. The only proven way to slow this down is to incentivize Americans to save more money to pay for future healthcare costs. By having to spend their own money, people will be much more prudent in how they spend it.
Medicare Medical Savings Account (MSA) plans are a major step in that direction.
Ask your Medicare insurance agent and/or financial advisor for their thoughts about Medicare MSA plans.
Reference Andersen Alumni for a FREE Telephone Review of Your Medicare Options, including the Lasso MSA plans, call 404.821.1886
Greg O’Brien is Managing Principal of Medicare Caddy, LLC. Based in Atlanta, GA, Medicare Caddy is a licensed insurance agency specializing in all forms of Medicare related insurance. Medicare Caddy has helped hundreds of people evaluate Medicare options and enroll in the plans that optimize their Medicare benefits.
Greg can be reached by email at email@example.com, phone 404.821.1886 or visit https://www.medicarecaddy.com/andersen-alumni-association