Can You Have an HSA With Medicare?

A Health Savings Account (HSA) is a tax-advantaged personal savings account for qualified medical expenses. Contributions are not subject to federal income tax at the time of deposit, and funds can grow tax-free. Medicare is a federal health insurance program primarily for individuals aged 65 or older, though some younger people with specific disabilities or conditions may also qualify. It helps cover various healthcare costs, including hospital stays, doctor visits, and prescription drugs. This article clarifies the rules governing HSA contributions and utilization when Medicare enrollment is a factor.

Understanding HSA Contribution Rules

To contribute to a Health Savings Account, an individual must be covered by a High Deductible Health Plan (HDHP). An HDHP is a health plan that meets specific yearly Internal Revenue Service (IRS) limits for deductibles and out-of-pocket costs. For instance, in 2025, an HDHP requires a minimum deductible of at least $1,650 for self-only coverage or $3,300 for family coverage.

Individuals must also not have any other disqualifying health coverage. This includes coverage from other health plans, such as a general-purpose Flexible Spending Account (FSA) or secondary insurance that pays for non-preventive care before the deductible is met. Medicare is considered “other health coverage” and is not an HDHP. Therefore, an individual enrolled in any part of Medicare is ineligible to make new contributions to an HSA.

Medicare Enrollment’s Effect on Contributions

Once an individual enrolls in any part of Medicare (Part A, B, C, or D), they become ineligible to make new HSA contributions. This rule applies even if the individual continues to work and is covered by an HDHP through their employer. The ability to contribute to an HSA ceases the month Medicare coverage begins.

A specific consideration for those nearing Medicare eligibility is the “6-month look-back rule” for Medicare Part A. When an individual enrolls in Medicare Part A after age 65, their coverage can retroactively begin up to six months prior to their application date, though not earlier than their 65th birthday. If HSA contributions were made during this retroactive period, those contributions are considered excess and can be subject to tax penalties.

Automatic Medicare Part A enrollment can also impact HSA contributions. Individuals who begin receiving Social Security retirement benefits are automatically enrolled in Medicare Part A. This can trigger the 6-month look-back rule, potentially causing an individual to be retroactively ineligible for HSA contributions if they continued to contribute while receiving Social Security benefits. To avoid potential tax issues, it is advised to stop HSA contributions at least six months before applying for Medicare or initiating Social Security retirement benefits.

Utilizing Your HSA After Medicare Enrollment

While new contributions to an HSA are prohibited once an individual enrolls in Medicare, accumulated funds remain accessible. These funds can continue to be used tax-free for qualified medical expenses, providing a valuable resource for covering healthcare costs in retirement. Qualified medical expenses that can be paid using HSA funds include:

Medicare premiums for Parts B, C, and D
Medicare deductibles, copayments, and coinsurance
Prescription drugs, dental care, vision care, and hearing services
Long-term care insurance premiums, subject to certain limits

Common Situations and Important Notes

Individuals approaching Medicare eligibility while possessing an HSA face specific considerations. Delaying Medicare enrollment may be an option for those still working and covered by an HDHP through an employer, allowing them to continue contributing to their HSA. However, this decision requires careful evaluation, especially concerning employer size, as health coverage from employers with fewer than 20 employees may pay secondary to Medicare.

Contributions made after Medicare coverage starts, even retroactively, are considered excess contributions. Such excess contributions are subject to a 6% excise tax, applied annually until the excess amount is removed from the account. These excess contributions and any earnings they generate may also be subject to income tax.

If an inadvertent over-contribution occurs, individuals can withdraw the excess amount and any attributable earnings before the tax filing deadline to avoid the excise tax. This process often involves contacting the HSA provider. Given the complexities of these rules and the potential tax implications, consulting with a tax professional or financial advisor is advisable for personalized guidance.