- Health Savings Accounts (HSAs) are health savings plans that allow you to contribute tax-free. You may also withdraw from your HSA tax-free for qualified medical expenses (such as paying for your Medicare premiums, deductibles, copays, and coinsurance).
- Once your Medicare coverage starts, you may no longer contribute to your HSA. Any amount you contribute may be considered an excess contribution and could be subject to excise tax. However, you can still typically withdraw the money in your HSA for qualified medical expenses.
- If you’re turning 65 soon, checking how Medicare works with your current health insurance is vital for ensuring a smooth transition. Read below to learn all you need to know about Medicare and HSAs!
If you have a Health Savings Account (HSA) and are turning 65 soon, it is critical to learn how Medicare interacts with HSAs.
Yes, Medicare interacts differently with most kinds of private insurance, and it can get pretty confusing. It’s even more important to know the nuances of HSAs since there are potential tax penalties.
In this article, we’ll go over how HSAs work and how they interact with Medicare, as well as some potential pitfalls you need to know about.
What are HSAs?
Health Savings Accounts (HSAs) are savings accounts that you can use for qualified medical expenses. You can contribute and withdraw tax-free from HSAs. To contribute to an HSA, you must be enrolled in an HSA-eligible health plan. For 2026, all Bronze and Catastrophic Marketplace health plans are HSA-eligible, and some other plans may qualify depending on their deductibles and out-of-pocket maximums.
As the name suggests, High-Deductible Health Plans (HDHP) have high deductibles but typically have lower monthly payments. In 2026, the HDHP minimum deductible for self-only coverage is set to $1,700, while the maximum is at $8,500 ($3,400 – $17,000 for family coverage).
Your employer may offer an HDHP, so check with them if you’re interested..
How Much Can You Contribute to an HSA?
If you are eligible for an HSA, enrolling in one and contributing to it may give you tax advantages. In 2026, you may contribute $4,400 tax-free to your HSA. However, if you are aged 55 or older, you may contribute an additional $1,000, for a total of $5,400 in 2024.
You may contribute even more if you have family HDHP coverage. Visit irs.gov to learn more about these.
What Do HSAs Cover?
You can use your HSA funds to cover qualified medical expenses tax-free. According to CMS.gov, this includes things like:
- Acupuncture
- Ambulance costs
- Doctor visits
- Hearing aids
- Prescription drugs
- Psychological therapy/psychiatric care
- Qualified long-term care services
You can also use your HSA funds to pay for your Original Medicare and Medicare Advantage premiums, deductibles, copays, and coinsurance. However, you cannot use your HSA to pay your Medicare Supplement (Medigap) Plan premiums.
If you withdraw money from your HSA for non-qualified medical expenses, the amount you withdraw may be subject to income tax. You may also be subject to an additional 20% tax.
How Does Enrolling in Medicare Affect Your HSA?
When your Medicare coverage starts, your HSA contribution limit is set to $0 (IRS). This means you may no longer contribute to your HSA tax-free.
Keep in mind that this also applies if you enroll in Medicare Part A only. Many people who choose to stay on their private health insurance also opt to enroll in Medicare Part A (since there’s a $0-premium for most people). However, if you do this, your HSA contribution limit will be set to $0.
If you contribute to your HSA while enrolled in Medicare, the amount you put in will be considered an “excess contribution.” Generally, you must pay a 6% tax on excess contributions (IRS).
You may still use your HSA funds for qualified medical expenses tax-free (including Medicare premiums, deductibles, copays, and coinsurance). However, you may no longer contribute tax-free to your HSA account.
Note: to learn more about how HSAs interact with Medicare, you may read the IRS’s full publication on HSAs.
Should You Delay Enrolling in Medicare To Keep Contributing to Your HSA?
Whether you delay enrolling in Medicare to continue your HSA contributions or stop your contributions to enroll in Medicare is completely up to you. It’s wise to crunch the numbers yourself to see which is the better financial decision.
If you want professional help, you can always call or text us at +1 877-360-6565 (TTY: 771), and we’d be glad to help!
However, there are a few potential pitfalls that you need to be aware of. Let’s go over some of the most common ones, so you can avoid them.
Pitfall #1: Not Checking Who Pays First
Before choosing to stick to your private health insurance to contribute to your HSA, make sure to check if it pays first then Medicare!
Whenever you have Medicare and other insurance, there’s typically a primary payer and a secondary payer. Medicare interacts differently with different types of insurance (you can find a list of who pays first on Medicare.gov).
Generally speaking, if your employer has 20 or more employees, your HDHP (or other employer plan) will typically pay first than Medicare.
This usually allows you to decide between keeping your HDHP + HSA or switching to Medicare.
However, if your employer has less than 20 employees, their health plan will typically pay second to Medicare. If Medicare becomes your primary payer, and you don’t enroll in Medicare, you essentially become the primary payer—putting you at high out-of-pocket risk (AARP).
Aside from that, if Medicare is supposed to be your primary payer, but you don’t enroll during your Initial Enrollment Period, you may be subject to a late enrollment penalty.
The Medicare Part B late enrollment penalty is an additional 10% added to your Medicare Part B premium for every year you delay.
However, if your company has 20 or more employees and you’re covered by their health plan, you typically qualify for a Special Enrollment Period. This allows you to delay enrolling in Medicare without worrying about the late enrollment penalty.
Again, check Medicare.gov to see a list of how Medicare interacts with different types of insurance and to see if you qualify for a Special Enrollment Period.
Pitfall #2: Medicare Part A’s Retroactive Coverage
If you choose to delay enrolling in Medicare to contribute to your HSA, keep in mind that Medicare Part A has retroactive coverage. If you enroll in Medicare Part A six-months after your 65th birthday, your coverage will be retroactive for six months.
For example, let’s say you enroll in Medicare Part A when you turn 67. If you enroll in November, your Medicare Part A coverage technically began in May of the same year (six months retroactive).
This means that any HSA contributions you made since May (your retroactive Medicare Part A start date) will be considered excess contributions and subject to tax (IRS).
That’s why, if you don’t enroll in Medicare once you turn 65, it’s wise to stop contributing to your HSA six months before you plan to enroll in Medicare.
Pitfall #3: Getting Enrolled in Medicare Automatically
If you’re taking Social Security at least four months before turning 65, you’ll automatically be enrolled in Medicare once you turn 65. Your welcome packet and Medicare card should be shipped to you three months before your coverage starts.
Many people get caught off guard by this.
Usually, it’s not a bad thing. But if you’re unaware you’re being enrolled in Medicare, it can cause complications with your other insurance (such as no longer being able to contribute to your HSA).
If you’re taking Social Security and are automatically enrolled in Medicare, review your welcome packet carefully before making HSA contributions. You may be able to decline Part B, but if you qualify for premium-free Part A, you generally can’t drop Part A just to keep contributing to an HSA. Contact Social Security before making changes. You can find instructions on how to drop Medicare in your welcome packet. You may also contact Social Security for more help.
Conclusion: How to Save on Medicare!
Medicare is already confusing as is.
When you add other insurance to the mix, you get a heaping pile of nuances that can be confusing to understand.
We hope this simple guide helps you understand how Medicare interacts with HSAs!
As always, if you need any help, you can call or text our team of professional licensed insurance agents at +1 877-360-6565 (TTY: 711).
Or, if you’d like to learn more about everything you need to know to get started with Medicare—including what and when to enroll to avoid penalties and save money—then check out our FREE Medicare workshop!
In it, we go over the A to Z of Medicare, so that you can have the smoothest transition into Medicare, and get the best plans fit for you:
Calvin Bagley is the founder of PlanFit, The Medicare Store, and Nuvo Health. He and his team have helped over 60,000 people navigate Medicare options, and he’s a nationally recognized speaker in the Medicare industry. Most importantly, he’s someone who believes every American deserves clear, honest information without pressure.
