Using an HSA to Pay for Medicare Premiums, Copays, and Deductibles

Once you’re enrolled in Medicare, you can’t contribute to a Health Savings Account (HSA) anymore. However, you still have access to the HSA funds you’ve accumulated over the years.

The question is: how can you use your HSA funds once you’re getting Medicare benefits?

Can I use my HSA to pay my Medicare Advantage premiums?

Good news – you can use funds in your HSA to pay for Medicare Advantage insurance premiums in the form of a reimbursement. Medicare Advantage plans, also called Part C plans, also come with out-of-pocket costs, like copays and deductibles. You can pay for those costs with your HSA funds, as well.

How it works: After you pay your Medicare Advantage-related plan costs, you can reimburse yourself for them from your HSA.

Even though 54% of Medicare Advantage plans have no premium, nearly 1 in 5 enrollees still pay at least $50 per month on Medicare Advantage premiums (KFF, 2021).

If you have funds in an HSA account, now is the time to use them to help cover the cost of your Medicare Advantage premium, copays, coinsurance, and deductibles.  

Can I use my HSA to pay for my spouse's Medicare premiums?

If your spouse is on Medicare, you might be able to use your own HSA to pay for their Medicare premiums.

However, you must be 65 or older. Optum Financial, the market leader in HSAs in the United States, explains that you must be at least 65 before you can contribute to your spouse’s Medicare premiums using your own HSA funds.

As long as you – the HSA account owner – are age 65+, you can reimburse your spouse’s Medicare premiums income tax-free.

If you and your spouse have HSAs, it often makes sense to deplete funds from one HSA to avoid paying monthly administration or maintenance fees on two accounts. In that case, you might use your HSA to pay for you and your spouse’s Medicare premiums. Once your HSA funds run out, you can start using your spouse’s.

Can I pay Medicare Part B premiums from my HSA?

Yes, you can pay your Medicare Part B premiums from your HSA. However, you won’t be directly paying the Part B premium – you’ll be reimbursing yourself for the expense.

Most likely, your Medicare Part B premium will be taken out of your Social Security check. Then, you’ll reimburse yourself for the Medicare Part B premium, income tax-free.

Can I pay Medicare Supplement premiums from my HSA?

Unfortunately, you cannot pay Medicare Supplements premiums using HSA funds. Medicare Supplement premiums, or Medigap premiums, are one of the only Medicare plan types that you cannot pay for using HSA funds (Publication 969, 2020).

In sum, Medicare Supplement premiums are not considered a qualified medical expense.

That said, you could cover deductibles, copays, or coinsurance using your HSA funds. As an example, Medicare Supplement Plan G has a small deductible; Plan N comes with doctor and ER copays – you can reimburse yourself for these expenses.

Can I use my HSA to pay for Medicare Part D?

Yes, you can use accumulated HSA funds to pay for Medicare Part D premiums. You can also use your HSA funds to cover copays at the pharmacy.  

What is the penalty for having an HSA and Medicare?

There’s no penalty for simply having an HSA and being enrolled in Medicare. However, if you continue contributing funds to your HSA after being enrolled in Medicare, you will face penalties from the IRS.

IRS penalties include payment of back taxes on your tax-free contributions and account interest in addition to excise taxes and additional income taxes. On all funds you contributed to your HSA after becoming eligible for Medicare, you will owe a 10% income tax penalty.

In sum, once you enroll in Medicare, you must stop contributing to your HSA.

Can I reimburse myself for past Medicare premiums?

If you have an HSA and didn’t realize you could use those funds to pay for Medicare premiums and other out-of-pocket costs, you can still reimburse yourself.

Even if you have several years of paid Medicare premiums, you can still reimburse yourself for all of those months!

You just need to keep receipts proving that you paid for qualified medical expenses. Those receipts or documents will only be used in the event of an audit.

Conclusion

Contributing to an HSA in your working years is an excellent way to help plan for healthcare costs in retirement.

After you turn 65, you can no longer contribute to an HSA, but you can use your accumulated funds to cover all types of Medicare-related premiums and out-of-pocket costs.

If you have an HSA, you might be interested in the Medicare MSA. Learn more here: What's the Difference Between an HSA and a Medicare MSA?