What is a Medical Savings Account (MSA)?

A Medical Savings Account (MSA) is specifically designed to work in conjunction with a high-deductible health plan, allowing individuals to save money for medical expenses. This option combines the characteristics of a high-deductible Medicare Advantage plan with a bank account that is used to fund qualified medical costs.

Individuals can deposit money into the MSA, which can then be used tax-free for eligible healthcare expenses. The funds in the account can roll over from year to year, offering a flexible way to manage healthcare spending. This structure encourages consumers to be more cost-conscious regarding their medical care since they are responsible for a higher deductible before the insurance coverage kicks in.

This understanding highlights how an MSA not only supports immediate healthcare needs but also promotes long-term savings for medical expenses, standing out distinctly from other savings or investment options that do not specifically align with healthcare spending.