HSA funds can only be put toward qualified medical expenses in order to be withdrawn income tax-free. As was before, you can continue to use your HSA to pay for expenses like dental work, eye exams, chiropractic and acupuncture visits, but Medicare eligibility opens up a few more doors.
The I.R.S. allows you to use your Health Savings Account to pay for:
- Medicare Part B premiums to the government
- Part D Drug premiums to an insurance company
- Medicare Advantage plan premiums to an insurance company
If your income is above certain thresholds, you will be charged more for your Medicare Part B and Part D premiums. You can use your HSA balance to pay these increased premiums as well. This can help to alleviate some of this financial burden until your income potentially decrease in retirement.
You can also pay for Medicare related deductibles, copays and coinsurance with your HSA. Even with a comprehensive Medicare Supplement plan, you may still have out of pocket costs. HSA plans can cover those – like your Part B deductible for insurance. You can also cover the cost sharing expenses associated with Medicare Advantage plans like deductibles and copays.
If you wish, you can use your Health Savings Account to pay for the care of a family member. The I.R.S allows for tax-free distributions from HSAs to cover health expenses for a spouse or a dependent. This is true even if you’re on Medicare and they are not.