MSA vs. HSA: What's the Difference?

Medicare savings accounts (MSAs) and health savings accounts (HSAs) both give consumers tax-advantaged ways to fund the costs of healthcare. MSAs, however, are only for people enrolled in Medicare Medical Savings Account plans, a type of high-deductible Medicare Advantage plan. Meanwhile, HSAs are generally available to eligible people with qualifying high-deductible health coverage, although certain additional plans qualify beginning in 2026. Medicare funds MSAs, while individuals and employers can contribute to HSAs. Both allow for tax-free growth of funds in the accounts, as well as tax-free withdrawals when withdrawals are used to pay for qualified medical expenses.

A financial advisor could help you create or adjust a retirement plan for your healthcare goals and needs.

Understanding HSA Basics

You can only contribute to an HSA if you have qualifying health coverage and meet other eligibility requirements. Generally, this means enrollment in a high-deductible health plan (HDHP). Beginning in 2026, bronze and catastrophic plans available through a health insurance exchange also qualify for HSA contributions, even if they do not meet the usual HDHP deductible requirements. The minimum deductible to qualify as an HDHP is $1,700 for an individual and $3,400 for a family for 2026. For 2027, it’s $1,750 and $3,500, respectively. In practice, HDHP deductibles often are much higher.

There is, however, a ceiling on how high the deductibles can be. In fact, one major benefit of an HDHP is that the premiums are often lower than for plans with lower deductibles. The limit for deductibles is the same as the maximum out-of-pocket cost, which for 2026 is $8,500 for individuals and $17,000 for families under the general HDHP rules. For 2027, those limits will increase to $8,700 and $17,400, respectively. These limits do not include premiums or out-of-network expenses.

HSAs have unique tax advantages. Individuals can put money into HSAs pre-tax, which means contributions are deducted from current taxable income. Plus, earnings generated also are not taxed. Finally, the funds in an HSA can be withdrawn tax-free when the money is being spent on qualifying healthcare costs.

The IRS does limit the amount that you can deposit in an HSA. For 2026, an individual can put up to $4,400 in an HSA, and in 2027, that will increase to $4,500. Families can contribute up to $8,750 ($9,000 for 2027). If you are age 55 or older, you can contribute an additional $1,000. These limits include both employer and individual contributions and generally assume eligibility throughout the year.

Understanding MSA Basics

MSAs are like HSAs for Medicare enrollees. They offer similar tax benefits, though MSAs are only available to people enrolled in the government Medicare program. Medicare recipients generally qualify at age 65, or earlier because of certain disabilities or medical conditions. However, MSAs are not available for all Medicare enrollees. Only people enrolled in Medicare Medical Savings Account plans can have MSAs.

MSAs can provide a tax-advantaged healthcare account for eligible Medicare recipients, who generally cannot make new HSA contributions once enrolled in Medicare. However, Medicare enrollment does not require someone to close an existing HSA or prevent them from using its remaining funds. Both plans offer significant tax advantages, including tax-free deposits or contributions and qualified withdrawals.

Medicare enrollees who want an MSA must enroll in high-deductible Medicare Advantage plans that private insurance companies run. Original Medicare, which consists of Medicare Part A hospital coverage and Medicare Part B coverage of outpatient and preventive care, has standard deductibles. Medicare Advantage plans, also called Medicare Part C, are offered by private insurance companies in place of Original Medicare.

Medicare MSA plans combine a high-deductible Medicare Advantage plan with a medical savings account funded through Medicare. These plans have their own deductible rules.

Withdrawals from an MSA plan that aren’t used for qualified health expenses are generally subject to a penalty amounting to 50% of the amount withdrawn. Income taxes at the MSA owner’s regular rate are also due. The additional tax generally does not apply after the account holder reaches age 65 or dies, although nonqualified distributions remain taxable.

MSA vs. HSA Comparison

HSAs and MSAs have overlap but also major differences. For starters, eligible HSA contributions are generally tax-deductible, or excluded from taxable income, when made through an employer. Meanwhile, Medicare MSA deposits are made by the plan using Medicare funding, rather than through tax-deductible contributions from the account holder.

Both plans offer tax advantages. HSAs offer a triple tax advantage: contributions are tax-deductible, earnings grow tax-free, and withdrawals for qualified medical expenses are also tax-free. MSAs provide similar benefits. For both HSAs and MSAs, withdrawals are tax-free only if used for qualified medical expenses.

Flexibility and portability also vary between an HSA and an MSA. HSAs are highly portable, meaning you can take the account with you if you change jobs or retire. Additionally, the funds roll over year after year. MSAs, however, are tied to specific high-deductible Medicare plans, although unused account funds carry over from year to year. The ability to receive new Medicare-funded deposits depends on continued enrollment in an eligible MSA plan.

Differences in eligibility, contribution rules and access to funds can all affect which account is available to you.

Feature	Health Savings Account (HSA)	Medicare Medical Savings Account (MSA)
Eligibility	Qualifying health coverage and other IRS eligibility requirements	Enrollment in a Medicare MSA plan
Who funds the account	Individuals, employers or other contributors	Medicare funding deposited through the plan
2026 contribution limit	$4,400 for self-only coverage or $8,750 for family coverage, plus a $1,000 catch-up contribution for eligible individuals age 55 or older	No individual contribution permitted; Medicare-funded deposits vary by plan
Tax treatment	Tax-advantaged contributions, tax-free earnings and tax-free qualified withdrawals	Tax-free plan deposits, earnings and qualified withdrawals
Unused funds	Carry over from year to year	Carry over from year to year
Nonqualified withdrawals	Subject to income tax and generally a 20% additional tax before age 65	Subject to income tax and generally a 50% additional tax before age 65
Medicare enrollment	Generally ends eligibility to make new contributions	Required through an eligible Medicare MSA plan

Choosing Between an HSA and MSA

Choosing between an HSA and an MSA depends on your circumstances, including your employment status, healthcare needs and financial goals. Most people cannot choose freely between the two because eligibility depends on their health coverage and Medicare enrollment.

For example, an eligible individual with self-only HSA coverage throughout 2026 could contribute up to $4,400, or $5,400 if they were age 55 or older. A Medicare MSA participant cannot make personal contributions to that account. Instead, the amount they can deposit would depend on the Medicare MSA plan selected.

A Medicare MSA participant should also compare the plan’s deductible with its annual deposit. If a hypothetical plan has a $5,000 deductible and provides a $2,000 deposit, the participant could have to pay up to $3,000 from other resources before meeting the deductible, assuming the full deposit is available and used for expenses that count toward it. Actual costs would depend on covered services, spending and the plan’s terms.

Bottom Line

MSAs provide a tax-advantaged account for people enrolled in Medicare MSA plans. While Medicare enrollment generally prevents further HSA contributions, it’s still possible to use existing HSA balances after Medicare enrollment. Both HSAs and MSAs offer significant tax advantages, including tax-free earnings and qualified withdrawals. Medicare enrollees who want MSAs have to enroll in high-deductible Medicare Advantage plans run by private insurance companies. HSAs are available to eligible people with qualifying health coverage, including HDHPs and certain exchange plans.

Tips on Funding Healthcare

Selecting the best health insurance for yourself involves evaluating several variables, ranging from your age and personal health to your financial resources and lifestyle. An experienced financial advisor can help you cut through the complexity and make the right choice. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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