Can You Have an HSA and Medicare? Here’s What You Need to Know

Health Savings Accounts (HSAs) and Medicare have important interactions that can affect your healthcare planning and tax situation. Let’s break down the key points you need to understand.

The Basic Rule: You Can’t Contribute to an HSA While on Medicare

Once you enroll in Medicare, you can no longer contribute to an HSA. This includes:

• Medicare Part A
• Medicare Part B
• Medicare Part C (Medicare Advantage)
• Medicare Part D

Important Deadlines to Remember

Example Timeline:

• Birthday: July 15, 1959
• Medicare Eligibility: July 1, 2024
• Last HSA Contribution: June 30, 2024

Key Dates to Know:

1. Stop HSA Contributions:

   • Must stop 6 months before Medicare enrollment
   • Example: If enrolling July 1, stop contributions by January 1

2. Pro-rated Contribution Limits:

   • If enrolling mid-year, your HSA contribution limit is prorated
   • Example: Enrolling July 1 = 6/12 of annual limit

Avoiding Tax Penalties

Common Mistakes to Avoid:

1. Late Contributions:

   • Contributing after Medicare enrollment
   • Penalty: 6% excise tax on excess contributions

2. Backdated Medicare:

   • If you delay Part A enrollment
   • Must stop HSA contributions 6 months before retroactive coverage

Example Scenario:

January 2024: Enroll in Medicare Part A
February 2024: Make HSA contribution
Result: 6% penalty on February contribution

Using Your Existing HSA Funds

What You CAN Do:

• Continue using existing HSA funds
• Pay for qualified medical expenses
• Reimburse yourself for past expenses
• Use for Medicare premiums (except Medigap)
• Use for long-term care insurance

What You CAN’T Do:

• Make new contributions
• Use for Medigap premiums
• Use for Medicare Advantage premiums

Planning Strategies

Before Medicare:

1. Maximize Contributions:

   • Contribute up to limit
   • Consider catch-up contributions if 55+
   • Example: $4,150 + $1,000 catch-up in 2024

2. Document Expenses:

   • Keep receipts for future reimbursement
   • Track qualified medical expenses
   • Save for future healthcare needs

After Medicare:

1. Track Spending:

   • Use for Medicare deductibles
   • Pay for prescription drugs
   • Cover dental and vision expenses

2. Long-term Planning:

   • Consider long-term care insurance
   • Plan for future healthcare needs
   • Budget for Medicare premiums

Need Help Planning Your HSA Strategy?

At MedStar Insurance Agency, we can help you:

• Plan your HSA contribution strategy
• Coordinate Medicare enrollment timing
• Maximize your healthcare savings
• Avoid tax penalties
• Make the most of your existing HSA funds

Contact us today to get personalized guidance on managing your HSA with Medicare!

Remember: Proper planning is crucial to avoid tax penalties and maximize your healthcare savings. Start planning at least 6 months before your Medicare enrollment date!