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What to Do With Your HSA After Medicare Starts: Washington Guide

Once you have any part of Medicare, you can't add money to a Health Savings Account, but you keep what's there and can spend it tax-free on qualified medical expenses for life, including Part B, Part D and Medicare Advantage premiums. Medigap premiums don't qualify, and the contribution limit is prorated in the year Medicare starts.

By the Benefits Life Editorial Team, licensed insurance agents · Reviewed November 9, 2026

The rule: no HSA contributions with Medicare

The IRS doesn't allow HSA contributions for anyone enrolled in any part of Medicare: Part A, Part B, Part C (Medicare Advantage) or Part D. Contributions must stop for the months your Medicare coverage is in effect.

This catches people in two ways:

Automatic Part A enrollment. If you get Social Security benefits when you turn 65, you're enrolled in Part A automatically. Many people don't realize this ends HSA contributions.
The 6-month retroactive trap. If you wait past 65 and then sign up, Part A can be retroactive up to 6 months. HSA contributions for those months are excess contributions subject to a 6% excise tax until removed.

The partial-year limit for the year you enroll

In the year Medicare starts, your HSA contribution limit is prorated by the number of months you were HSA-eligible (the IRS counts eligibility as of the first day of each month). If your Medicare starts July 1, you can contribute 6/12 of the annual limit, for January through June.

2026 HSA contribution limits (IRS):

Self-only high-deductible coverage: $4,400
Family high-deductible coverage: $8,750
Catch-up (age 55 or older): an additional $1,000

Example: you're 66, have family high-deductible coverage, and Medicare starts May 1, 2026. You were eligible for 4 months, so you can contribute (4/12) × ($8,750 + $1,000) = $3,250 for 2026. Anything more is an excess contribution. (The retroactive Part A rule can move your Medicare start earlier, which shrinks this.)

What you can still do with your existing HSA

Once you stop contributing, the money in your HSA stays there. Under IRS Publication 969 you can:

Use it for qualified medical expenses, tax-free. There's no deadline and no use-it-or-lose-it rule.
Pay Medicare premiums. Part A (if you pay it), Part B, Part C (Medicare Advantage) and Part D premiums are qualified expenses once you're 65. Medigap premiums are not.
Pay qualified long-term care insurance premiums, up to IRS age-based annual limits.
Pay deductibles, copays and coinsurance for Medicare or other coverage.
Pay for dental, vision and hearing aids, which Original Medicare generally doesn't cover. See What Medicare doesn't cover.
Reimburse yourself for past qualified expenses incurred after you set up the HSA, if you kept records.
Withdraw for non-medical reasons after 65: taxed as income, but without the additional 20% tax that applies before 65.
Keep the funds invested, if your HSA trustee offers investment options.

Using an HSA for Medicare costs

For Washington retirees with HSA balances, these are the Medicare costs an HSA can cover:

Part B premiums. The 2026 standard Part B premium is $202.90 a month ($2,434.80 a year), and higher-income people pay more because of IRMAA, up to $689.90 a month in 2026. See IRMAA in Washington.

Part D premiums and drug costs. In 2026, out-of-pocket costs for covered Part D drugs are capped at $2,100 a year, plus your plan premium. See Prescription drug costs in Washington.

Dental, vision and hearing aids. Original Medicare generally doesn't cover these, and an HSA can pay for them tax-free.

Long-term care. HSA funds can pay qualified long-term care insurance premiums (up to age-based limits) or qualified long-term care services. Washington's WA Cares Fund is a separate state benefit.

Timing before Medicare starts

If you're approaching 65 and plan to delay Medicare because you're working past 65 with employer high-deductible coverage, you can keep contributing as long as you're HSA-eligible:

Catch-up contributions. At 55 or older you can add $1,000 a year to your limit.
Don't sign up for Part A early. Most people get Part A with no premium, but enrolling ends HSA contributions. If HSA contributions matter to you, wait on Part A until you stop working, and make sure you can delay Part B without a penalty. See Working past 65.
Starting Social Security before 65 means automatic Part A at 65. If you're already getting Social Security, you'll be enrolled in Part A when you turn 65.
Your spouse's Medicare doesn't affect you. Only your own Medicare enrollment ends your HSA eligibility.

The 6-month lookback: the Part A surprise

If you sign up for Part A or Social Security after 65, Part A coverage can be backdated up to 6 months (but not before the month you turned 65). HSA contributions for the backdated months become excess contributions.

The fix: stop HSA contributions at least 6 months before the month you plan to sign up for Medicare. If you'll sign up in October, make your last contribution for March or earlier. Medicare.gov gives the same 6-month advice.

What happens to the HSA when you die

Spouse beneficiary: the HSA becomes your spouse's HSA, and they can use it for their qualified medical expenses tax-free.
Other beneficiary: the account stops being an HSA. Its fair market value is generally taxable income to the beneficiary in the year of your death, reduced by qualified medical expenses of yours they pay within one year.
Estate: if your estate is the beneficiary, the value is included on your final income tax return.

Keep your beneficiary designation up to date with your HSA trustee, and ask a tax or estate professional about your situation.

Common HSA-after-Medicare mistakes

Contributing after Part A starts, including during the 6-month retroactive window.
Paying Medigap premiums from the HSA. Part B, C and D premiums qualify; Medigap (Medicare Supplement) premiums don't.
Not keeping receipts. You can reimburse yourself later for qualified expenses, but only with records.
Withdrawing before 65 for non-medical reasons, which brings income tax plus an additional 20% tax.

How an HSA compares with other accounts

A general summary of federal tax treatment (rules have conditions; see IRS publications):

Account	Money going in	Withdrawals for qualified medical costs	Withdrawals for other uses
HSA	Deductible or pre-tax	Tax-free	Income tax (plus 20% before 65)
Roth IRA	After-tax	Tax-free if a qualified distribution	Tax-free if a qualified distribution
Traditional IRA	Often deductible	Income tax	Income tax
Taxable account	After-tax	Tax on investment gains	Tax on investment gains

Washington-specific HSA notes

State income tax. The Washington Department of Revenue says Washington does not currently have an individual income tax, so the HSA tax rules on this page are federal. A new state income tax on very high incomes takes effect January 1, 2028, according to the department; check dor.wa.gov.
Apple Health. If you qualify for both Medicare and Apple Health (Medicaid), Apple Health or a Medicare Savings Program may pay your Part B premium and some cost sharing, and your HSA can still pay qualified expenses those programs don't. Ask Apple Health how an HSA balance counts toward its resource rules. See Medicare Savings Programs and Apple Health.
Help with plan choices. A licensed insurance agent with Benefits Life can explain Medicare plan options at (206) SENIORS (206-736-4677), TTY 711, at no cost to you (agents don't give tax advice), or you can see plans in your ZIP code.

Sources

Frequently asked questions

Can I keep contributing to my HSA after Medicare starts?

No. Once you're enrolled in any part of Medicare (Part A, B, C or D), you can no longer contribute to an HSA. You keep the money already in the account and can use it tax-free for qualified medical expenses. This applies even to Part A, which most people get with no premium.

Can I use my HSA to pay Medicare premiums?

Yes, once you're 65 or older. Part A (if you pay it), Part B, Part D and Medicare Advantage premiums are qualified HSA expenses. Medigap (Medicare Supplement) premiums are not. You can also use HSA funds for deductibles, copays, prescriptions, dental, vision, hearing aids and qualified long-term care costs.

What's the 6-month retroactive Part A trap?

If you sign up for Part A (or for Social Security, which includes Part A) after 65, Part A coverage can start up to 6 months earlier, but not before the month you turned 65. HSA contributions for those months can become excess contributions subject to a 6% excise tax. To avoid this, stop contributions at least 6 months before you sign up for Medicare.

Should I delay Medicare to keep contributing to my HSA?

It can make sense if you're still working with group coverage from an employer with 20 or more employees, so delaying Part B doesn't bring a penalty. Weigh the HSA contributions against what Medicare would add to your coverage, and remember that starting Social Security enrolls you in Part A. A tax professional can help with the tax side.

What happens to my HSA when I die?

If your spouse is the beneficiary, the account becomes their HSA. If someone else is the beneficiary, the account stops being an HSA and its value is generally taxable income to them in the year of your death. If your estate is the beneficiary, the value goes on your final income tax return. IRS Publication 969 explains the details.

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