HSA Optionality

Barron's had a short writeup on health savings accounts (HSA). If you are familiar with HSAs there probably wasn't anything new but it did prompt me to think about a use for HSA money that I hadn't thought about before for how my wife and I could or would use our HSA. Hopefully this is useful for anyone else in a similar circumstance of having an HSA and starting to look around a couple of corners at how Medicare works. 

The cost of Medicare Part B is deducted from your monthly SS check. Part D for prescriptions is usually paid directly by the individual. Both expenses are considered qualified for HSA withdrawals, meaning you can reimburse yourself out of your HSA account. This year, Part B is $202.90 (more for people paying an IRMAA surcharge).

This creates some optionality for people who have HSA accounts. In addition to Parts A, B and D, it is common to get some sort of Medigap coverage which has costs and coverage above and beyond A, B and D. According to Copilot, Plan G which is one of the more robust Medigaps averages around $250/mo in Arizona (that is a general number). The $250, or whatever dollar figure you find, Medigap cost is not a qualified expense in HSA terms. 

Part B is qualified, Medigap is not. A little bit of mental accounting here but money taken out of an HSA as reimbursement for Part B goes into your checking account to be spent on whatever you like. The Part B reimbursement is what lets you withdraw tax free from the HSA. From there, that $202 can be spent on anything repeated for emphasis including Medigap coverage. Like I said, mental accounting but nice little hack. 

Someone who is paying IRMAA can pull more out of their HSA if they want for their reimbursement. If they are paying $281 in 2026 dollars for Part B then they have access to $281 which more than covers the $250 Plan G figure we are using as an example. 

I expect to still have a decent earned income for the first few years of Medicare eligibility (self-employed there's no employer plan for me to stay on) so I doubt I would pull from my HSA for a while in this context, maybe at 70 or a little later?

Maybe I am the last person to have thought of this but either way, it adds a little optionality to the Medicare process. The more optionality we can find, the better.

Another new thing for me is that Plan N might make more sense and be cheaper for people who are not managing chronic maladies and going to the doctor frequently for their chronic maladies. Copilot and Claude conflicted a little on how much cheaper Plan N is versus Plan G. Copilot thought $1000/yr cheaper for a couple versus $1200 from Claude.

For now, it is useful for me to be aware that Plan N is an option if our good luck with health continues. Is saving $1000-$1200 worth it? That is up to the end user and we'll see where we are when the time comes.

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