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Ask Ms. Medicare

Can I Have a Health Savings Account as Well as Medicare?

The difference between 'eligible' and 'entitled' matters

  • If you’re entitled to Medicare because you signed up for Part A at age 65 or later (perhaps not realizing that it can affect the use of your HSA) but have not yet applied for Social Security retirement benefits, you can withdraw your application for Part A. (To do so, contact the Social Security Administration at 1-800-772-1213.) There are no penalties or repercussions and you are free to reapply for Part A at a future date.
  • But if you have applied for, or are receiving, Social Security benefits—which automatically entitles you to Part A—you cannot continue to contribute to your HSA. And in these circumstances, the only way you could opt out of Part A is to pay back to the government all the money you’ve received in Social Security payments, plus everything Medicare has spent on your medical claims. You must repay these amounts before your application to drop out of Part A can be processed. If you take this action, you’re no longer entitled to Social Security or Medicare—but you can reapply for both at any time in the future (for example, if you end or lose your HSA coverage).

What if you are covered under your spouse’s health savings account at work? The IRS rule affects only employees age 65 or older who have HSAs through their employment, because they are the ones who contribute to HSAs from their before-tax earnings at work.  The rule does not affect covered spouses over age 65, who can continue to use funds from the working spouse’s HSA for approved medical purposes. 

What if you received Medicare Part A under age 65 through disability? In this situation, you’re entitled to Medicare as soon as you’ve received your 25th disability check from Social Security. In other words, you automatically go into the Medicare system. If you’re able to return to work, eventually your disability payments will stop—but your Medicare entitlement continues for up to 93 months from the time you first applied for disability. For most people, this is an advantage. But if your employer offers health insurance in the form of a health savings account, you’re ineligible to take it because you have Medicare. Again, the only way you can opt out of Part A is to repay Social Security for all the disability payments you’ve received, even if you’ve never used Medicare for medical services, and to repay Medicare for any services that you have used.

This situation has been the focus of a lawsuit that alleges that denying Social Security benefits to people who wish to opt out of Part A is unlawful and unconstitutional. On February 7, 2012, a federal court of appeals rejected plaintiffs’ arguments and ruled that “there is no statutory avenue for those who are 65 or older and receiving Social Security benefits to disclaim their legal entitlement to Medicare Part A benefits.”

A bill introduced in Congress in June 2011 would allow people to opt out or suspend their Part A entitlement without affecting their Social Security payments.

You may also like: Everything you need to know about Medicare.

Patricia Barry is a senior editor at the AARP Bulletin.

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