HSA Accounts and Medicare | What You Should Know

January 08, 2026 by Carolyn Richardson, EA, MBA

Americans are getting older every day, and this is particularly true of those born during the “baby boom” era of post-World War II America. Many boomers are already well into their retirement age, but even the tail end of that generation, like me, is approaching age 65 faster than we’d like to think about. So fast, in fact, that there’s even a term coined for it: “Peak 65,” where a record-breaking number of Americans are turning that age between 2024 and 2027. And while many older Americans may be contemplating retirement, many are also not ready to lay down their computer keyboard and retire. In fact, according to the Bureau of Labor Statistics, nearly 20% of all Americans aged 65 or older are still employed, either by choice or by financial necessity. 

With that in mind, you may be thinking to yourself whether you should sign up for Social Security benefits and Medicare, even if you’re still working. In this blog, we’re going to discuss HSA and Medicare and how they intersect.

 

What is an HSA?

HSA accounts are tax-exempt accounts that individuals can set up with a qualified trustee, which can be used to pay for or reimburse qualified medical expenses. Because the accounts are tax-exempt, employees enjoy the benefit of lower taxable wages if they are making contributions to the account, and contributions made by their employer are not taxable income to them. An HSA is also “portable,” meaning it isn’t tied to your employer, so anyone leaving one job for another can take the account with them. 

However, not all individuals will qualify to establish an HSA. To qualify for an HSA, taxpayers must meet the following requirements:

• They must be covered under a high-deductible health plan (HDHP), on the first day of the month. (We will discuss this in detail below.) 
• They cannot have any other health coverage, except certain permitted coverage. 
• They cannot be enrolled in Medicare. 
• They cannot be claimed as a dependent on someone else’s tax return. 

If you are married and both you and your spouse have HDHP coverage, you must maintain separate HSAs, as joint accounts are not allowed (this is similar to other tax-favored accounts, such as IRAs). HSAs should not be confused with other types of tax-favored accounts used to pay medical expenses, such as flexible spending accounts (FSAs) or Archer MSAs. 

 

What is an HDHP?

A high-deductible health plan (HDHP) is one that has a higher annual deductible than typical health plans, and a maximum limit on the sum of the annual deductible and out-of-pocket expenses that the covered individual must pay for covered expenses. HDHPs can also provide preventative care, such as immunizations, weight loss programs, screening services, annual physicals, and other types of care, without a deductible or a deductible less than the minimum. For 2025, the minimum annual deductible for family coverage under an HDHP is $3,300, with the maximum deductible set at $16,600, with self-only limits being half of these amounts ($1,650 minimum and $8,300 maximum). 

According to the CDC, nearly 42% of employees covered by private insurance had these types of plans in 2023 (the last year that information is available). While that percentage has fluctuated over the years, it remains a significant portion of workers. One reason these plans are so popular is that the cost to the employer is lower, as the higher deductible plans have lower premiums for both employers and employees. But the extra costs are shouldered by the employee through the higher deductible, and this is where HSAs come in, as employees can set aside money to help cover that deductible. Employers can also contribute to an employee’s HSA account as an added incentive for enrolling in this type of insurance plan.

 

How do HSAs and HDHPs connect with Medicare?

Given the ever-rising cost of health insurance in the U.S.A., an employee who is old enough to qualify may consider enrolling in Medicare in addition to having their employer’s health insurance. However, this may create a problem if you are still covered by your employer’s health insurance and participate in a Health Savings Account (HSA) because, once you enroll in Medicare, you are no longer eligible to contribute to your HSA.

 

Things to Consider Regarding Medicare

If you are considering enrolling in Medicare, keep in mind that timing is extremely important. Many seniors may not be aware that there can be penalties for signing up late for Medicare, especially if they are still working and are covered by health insurance at work. Most people may sign up for Medicare “Part A,” which is the hospital coverage, when they first become eligible, which is generally within 6 months of turning age 65. If you have end-stage renal disease or Amyotrophic Lateral Sclerosis (ALS, also called Lou Gehrig’s Disease), you may be eligible to enroll in Medicare even if you haven’t attained the age of 65. Since there are no premiums needed for Part A coverage, many workers might think, “Why not?” Part A coverage is retroactive for 6 months from the date you apply, so this is why you will want to sign up for this when you approach 65. You can start up Part A at any time after you turn 65 as well, and many people who are still working delay enrolling in Part A. There is no penalty for signing up for this part of Medicare after you turn 65. 

For Part B, which is the medical insurance portion of the program, the sign-up period gets more complicated. There are three main “special enrollment” periods for Part B, depending on whether you are still working. If you sign up within one of these periods, there is no penalty. The three periods are:

• Any time while you are still working and still covered by a group health plan; 
• Within 8 months of the day you (or your spouse, if married) stop working, even if your group plan continues beyond that date; 
• Within 8 months of the day your group health plan ends, while you or your spouse continues to work. 

For most cases, Part B becomes effective the month after you sign up, but it may be up to three months earlier or later.
 

If you miss these periods, you must enroll during the general enrollment period, which occurs between January 1 and March 31 every year. If you wait until the general enrollment period to sign up, you may be subject to a lifelong penalty. The penalty is 10% of the regular Part B premium for each year you could have signed up for Part B but didn’t. For example, if you delay taking Part B for 2 full years and don’t qualify for a special enrollment period, you will pay an additional 20% for your Part B Medicare premiums.
 

HSA and Medicare 6-Month Rule

As I mentioned previously, to have an HSA, you must be enrolled in a high-deductible health plan (HDHP). Any other type of health insurance plan will not allow you to contribute to an HSA. However, Medicare is not considered to be a qualified HDHP for purposes of maintaining an HSA, and this is where problems can arise. 

Medicare Part A coverage will start up to 6 months before the date you sign up for Medicare. If you plan to sign up for Medicare, you or your employer should stop contributing to the HSA for 6 months before you apply. If you continue to contribute to your HSA, the contributions made after you are covered by Medicare are considered excess contributions and are subject to a 6% tax penalty. 

This doesn’t mean you have to give up your HSA, though. You can continue to maintain the account (without making additional contributions) to withdraw the funds in the account to help pay for your share of costs, such as deductibles, coinsurance, copayments, or other premiums, without incurring additional taxes on the distributions. However, withdrawals cannot be used to pay the premiums for Medicare supplement or “MediGap” insurance plans.
 

Can My Spouse Contribute to an HSA if I am on Medicare?

If you are married, the limitation on contributing to an HSA by one spouse does not apply to the spouse who is receiving Medicare. Because there are no joint HSA accounts, a spouse can continue to contribute to their own HSA account, even if the other spouse is now covered by Medicare. 

For example, if you are 67 years old and enrolled in Medicare, and your spouse is 63 years old and you are both continuing to work, your spouse can continue to contribute up to the contribution limit for family coverage (if that is what they have elected) for the year, and it can be used by both spouses to cover medical expenses. For 2025, the contribution limit for family coverage is $8,550, and if your spouse is older than 55 years of age, there is an additional $1,000 “catch-up” contribution they can take advantage of. This is assuming, of course, that the plan participant's spouse does not change their coverage from family to individual coverage.
 

Medicare Plan Options that Work with an HSA

Another option, other than an HSA, that does work with Medicare is called a Medicare Medical Savings Account (MSA). These are a type of Medicare Advantage plan (Part C) that combines a high-deductible health plan with a medical savings account that is funded by Medicare. The funds are made as a lump sum deposit to the MSA at the beginning of the year and you can use those funds for healthcare costs. Any funds left over at the end of the year roll over to the next year. 

These MSA plans are not available to everyone, however. Taxpayers who are not eligible for an MSA Medicare option include those who have other health care overage that would cover the Medicare MSA deductible, such as employer or union retiree plans, those who receive health benefits from the Department of Defense (Tricare) or the Department of Veterans Affairs, retired federal government employees who are part of the Federal Health Benefits Program (FEHBP), taxpayers eligible for Medicaid, hospice, and taxpayers not living in the U.S. more than 183 days per year.
 

What Happens if I Continue to Contribute to My HSA after Enrolling in Medicare?

As we mentioned earlier, if you continue to contribute to an HSA after you are covered by Medicare, even if it is only Part A, the contributions made after your Medicare start date are considered to be excess contributions. Excess contributions are subject to a 6% excise tax that functions similarly to a penalty and are reported on Form 5329. For example, if you are a married taxpayer and continue to contribute the full amount to your HSA under family coverage ($16,600) when you are covered by Medicare, the penalty would be nearly $1,000! And to make matters worse, the penalty applies as long as there are excess contributions in the plan, so you may be subject to the penalty for more than one year. Healthcare is expensive enough without having to pay tax penalties on top of it, so it’s important to keep on top of your HSA and your Medicare enrollment date so you can prevent any excess contributions. 

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