Medicare Part A vs. HSA contribution - cost / benefit analysis

[jrbdmb]

I have a few years until I hit 65 and qualify for Medicare, and another few years until seriously contemplate retirement. I know I can start with Medicare Part A at 65, and wait to start other Medicare options when I retire since my employer health care is pretty good. However starting Part A means no more contributions to my tax-advantaged HSA account.

What I haven't found yet is if anyone has done a cost / benefit analysis of getting free Part A coverage vs. losing the HSA contribution. Perhaps it is obvious since Part A doesn't help me unless I am hospitalized, but it seems like continuing to grow my HSA for a few more years is a good thing - unless I am hospitalized and have to deal with my $8850 Out Of Pocket max for the year.

[kd2008]

I have a few years until I hit 65 and qualify for Medicare, and another few years until seriously contemplate retirement. I know I can start with Medicare Part A at 65, and wait to start other Medicare options when I retire since my employer health care is pretty good. However starting Part A means no more contributions to my tax-advantaged HSA account.

What I haven't found yet is if anyone has done a cost / benefit analysis of getting free Part A coverage vs. losing the HSA contribution. Perhaps it is obvious since Part A doesn't help me unless I am hospitalized, but it seems like continuing to grow my HSA for a few more years is a good thing - unless I am hospitalized and have to deal with my $8850 Out Of Pocket max for the year.

I asked similar questions awhile back. DH will turn 65 soon. I will continue to work. I asked if DH should sign up for Medicare Part A. We only lose $1000 in his HSA post age 55 contribution. I would still be able to make the $8,550 HSA contribution to my HSA.

The general consensus was this: No need to make definitive decision now. Take it year by year. Don't make DH HSA 2024 contribution until April 2025 (same for every year after you turn 65). That way if you sign up for Medicare Part A after age 65, you won't be affected by 6 month look back and won't have withdraw HSA contributions (understand this provision clearly - very important).

For a little bit of keeping up with the rules and details, you could continue making HSA contributions and in case of a health event, sign up for Medicare Part A and avail the 6 month retroactive coverage and stop HSA contributions.

Proverbial getting to cut the cake and eat it too.

Hope this helps.

[jrbdmb]

Great point about using the six-month look back, thanks. Thinking about it, you could also contribute the total amount early in the year (January 1 for example) and then reverse the contribution if you happen to be hospitalized prior to early July. If the hospitalization happens after that you get the benefit of the HSA contribution and the Part A benefit.

[kd2008]

Great point about using the six-month look back, thanks. Thinking about it, you could also contribute the total amount early in the year (January 1 for example) and then reverse the contribution if you happen to be hospitalized prior to early July. If the hospitalization happens after that you get the benefit of the HSA contribution and the Part A benefit.

I would suggest you never do this. You are simply being greedy for too much headache later? Are you confident you can calculate the "reversing" contributions and the earnings on it? Will your HSA provider be easy to deal with this? How soon will you get your oomph and vigor back after hospitalization to even do this and more importantly, even make it a priority?

The whole point of waiting till April to make contributions for previous year is to avoid having to deal with these headaches for marginal amount of money. After all your time and sanity are worth way more.