Yes, you can use your Health Savings Account (HSA) distributions to pay for Medicare Part B premium, Medicare Advantage plan (Part C), and prescription drug plan (Part D).
You can also continue to use you HSA to pay for Medicare expenses such as co-payments, co-insurance, deductibles, and even long-term care insurance. However once enrolled in Medicare, an individual can no longer contribute to a Health Savings Account (HSA).
Unfortunately you cannot use your HSA distributions to pay for Medicare supplemental policies, also known as Medigap policies.
Why can’t seniors use their HSA to pay for Medigap coverage? The purpose of HSAs is for individuals to use their own money to meet a substantial deductible, thereby providing a financial incentive to spend funds wisely and not to over consume. The benefit of a Medigap policy is to eliminate most of the out-of pocket exposure of Medicare Parts A and B. Therefore allowing HSA funds to pay for Medigap insurance does not qualify as a medical expense as defined in IRS Publication 502.
However once you turn 65, HSA withdrawal for non-medical purposes is treated as retirement income and subject to normal income tax, but not subject the 10% penalty. It is treated just like your 401(K) plan.
If you have more questions about your Medicare or your HSA, give us a call!