Key Takeaways

  • Medicare Savings Programs (MSPs) and Medicare Medical Savings Account (MSA) Plans can both help you manage your Medicare costs—but their similarities end there.

  • A Medicare Savings Program helps pay your Medicare out-of-pocket costs if you have low income. An MSA Plan is a high-deductible Medicare Advantage plan with a special savings account.

  • Need help sorting out your Medicare options? Free, unbiased support is available. Check out our resources at the end of this article.

While Medicare provides vital health coverage for millions of older Americans, trying to navigate the program can be overwhelming. Within the Medicare universe, you'll find a wide range of plans, coverage choices, and eligibility guidelines as well as cost sharing levels. 

Two Medicare options you may have heard about are Medicare Savings Programs and Medicare Medical Savings Account Plans. Although both programs have the word “savings” in their name and can help you manage your health care costs, they are not the same. Here’s a guide to understanding each offering and whether one of them is right for you.

What are Medicare Savings Programs?

Sponsored by state Medicaid agencies, Medicare Savings Programs (MSPs) help you pay for your Medicare out-of-pocket (OOP) costs if you have limited income and savings. These costs include premiums, deductibles, coinsurance, and/or copayments. MSPs may also be called Medicare Buy-In Programs or Medicare Premium Payment Programs.

To qualify for an MSP, you must be enrolled in at least Medicare Part A and meet your state’s income and asset limits. These limits are based on the Federal Poverty Guidelines that are updated every January.

There are four different MSPs available. Each program has its own eligibility guidelines and benefits:

You cannot choose which MSP you want to join. Rather, you’ll be enrolled in the program you qualify for based on your income, savings, and other personal details.

The main advantage of enrolling in an MSP is saving money on your Medicare OOP expenses.

Every dollar saved on Medicare out-of-pocket costs is a dollar that can be put toward groceries, utility bills, and other costs of living,” says Josh Hodges, NCOA's Chief Customer Officer.

“For older adults living on a fixed or low income, this financial help can prevent having to make difficult choices between food and needed medications,” Hodges said.

Another major benefit of an MSP is that you automatically qualify for Extra Help. This is a federal program that helps cover your Medicare prescription drug (Part D) plan costs.

What is a Medicare Medical Savings Account Plan?

A Medicare Medical Savings Account (MSA) Plan is a unique type of Medicare Advantage (Part C) plan provided by a private insurer. It combines a high-deductible health plan with a medical savings account. Most people who have Medicare Parts A and B can join an MSA Plan. There are some exceptions, such as people who are Medicaid-eligible or who have military-sponsored benefits.

Here’s a basic overview of how an MSA Plan works:

  • The insurer deposits a certain sum of money, provided by Medicare, into an interest-bearing savings account at the start of the year. This account works much like a traditional health savings account (HSA). It can help you save money by giving you pre-tax dollars to spend on qualifying medical costs.
  • The money in your account can be withdrawn tax-free to pay for Medicare-covered Part A and Part B services. You can also use your MSA funds to pay for prescription drugs and health expenses not covered by Medicare, such as dental, vision, and hearing.
  • With an MSA Plan, you can receive fee-for-care health services anywhere in the U.S. Unlike other Medicare Advantage plans, you are not restricted to a specific network of providers and hospitals.
  • If you use up all the money in your account, you must pay all of your health costs out of pocket until you meet the plan's deductible. After you meet the deductible, the plan pays 100% of your costs for the rest of the year.
  • If you don't spend all the money in your account by the end of the year, it rolls over into the next year and stays in your account.
  • You don't have to pay a premium for an MSA Plan, but you must continue to pay your monthly Part B premium.

The key advantages of a Medicare MSA Plan are more control over your health care spending and freedom of choice when it comes to providers. It can also be an affordable way to get protection against catastrophic health costs. Since plan deductibles can be high, MSA Plans are best suited for healthy Medicare enrollees with no chronic health conditions who expect fairly low medical expenses in the near future.

What is the main difference between MSPs and MSA Plans?

An MSP layers over your Original Medicare plan to help cover OOP costs like premiums, deductibles, coinsurance, and copayments. In contrast, an MSA Plan is a Medicare Advantage plan that provides another way to get your Medicare coverage altogether. And, while MSPs have strict income limits for enrollees, MSA Plans do not.

I have more Medicare questions. Where can I get help?

Figuring out your Medicare options is not something you have to do alone. Support is available:

  • Visit NCOA’s Age Well Planner to connect with a licensed Medicare enrollment specialist who meets our high Standards of Excellence.
  • Contact your local State Health Insurance Assistance Program (SHIP) for free, unbiased Medicare advice. Find your SHIP by visiting the program website or by calling 1-877-839-2675.
  • Visit BenefitsCheckUp®, our free online tool that can help you find all the money-saving benefits programs you qualify for, including the Medicare Savings Programs.