On December 8, 2003, President Bush signed the Medicare bill into law. The said law provides for ways to help individual save money to be used for any qualified medical and retiree health expenses they might have in the future, free of tax. Today, this plan is more commonly known as a Health Savings Account (HSA).
Who can get a Health Savings Account bank?
According to the Medicare law, any adult can contribute to a health savings account bank, provided that:
* They are covered under a “high deductible health plan” (HDHP) qualified for a health savings account bank plan.
* They do not have any other first dollar medical coverage. This means that the person must not have coverage under other types of insurance. However, coverage, such as dental care, vision care, specific injury insurance or accident, disability, or long-term care insurance, is allowed.
* They are enrolled in Medicare.
* They are not a dependent on someone else’s tax return.
You can make contributions to your health savings account bank on your own, or through your employer’s plan. You could also contribute both ways. Note, however, that the total contributions you make on your health savings account bank are limited.
One distinct advantage of health savings account banks is that it allows you certain privileges, particularly when it comes to the payment of taxes. The contributions you make can be deducted from your tax upon completion of the federal income tax return. This is so even if your deductions are not itemized.
However, when you enroll in Medicare, you are no longer qualified for a health savings account bank, so you must stop making further contributions after enrolling in Medicare. The money still left in your account, you can still keep or use for medical expenses, tax-free.
When can you use your Health Savings Account bank?
Whenever you have a “qualified medical expense,” you can pay for it using money from your health savings account bank. “Qualified medical expense” under federal tax law and the Medicare law means most medical care and services, including dental and vision care as well as over the counter drugs.
As a general rule, you cannot use the money in your health savings account to purchase medical insurance. The only exceptions are:
* If you use the money to pay for the premium of any health plan insurance while receiving federal or state unemployment benefits.
* If you use the money to pay for COBRA continuation coverage after leaving employment. Remember that your previous employer must have provided you with health insurance coverage during the period of employment.
* If you use the money to purchase qualified long-term care insurance.
* If you use the money to pay for premiums in Medicare.
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