2026 Tax Year · Current Figures
HDHP+HSA vs. Medicare Cost Comparison
An educational tool for clients age 65+ still employed with an HDHP. Models the cost math of staying on the employer plan versus enrolling in Medicare — either Original Medicare with a Supplement or a Medicare Advantage plan. This tool presents numbers only; it does not recommend a path. Your licensed insurance agent will discuss which option fits your specific situation, needs, and preferences.
Important · Please Read
Educational tool only. This comparison is for educational purposes and does not constitute tax, legal, financial, investment, or insurance advice. Chris Cockey is a licensed insurance agent, not a financial planner or tax professional. Decisions about retirement savings vehicles, tax strategy, and investment allocation should be made in consultation with a qualified tax advisor or financial planner. This tool does not recommend a specific Medicare path or plan — it presents cost math for both Original Medicare with a Supplement and Medicare Advantage, so you can see the numbers for yourself and have an informed conversation with your agent. We do not offer every plan available in your area. Please contact Medicare.gov or 1-800-MEDICARE (TTY 1-877-486-2048), 24 hours a day / 7 days a week, to get information on all of your options.
Model Assumptions
This tool models a specific scenario: a client currently working for a large employer (20+ employees), deciding whether to remain on the employer HDHP with an HSA or drop it and enroll in Medicare while continuing to work. Under this scenario, Medicare late enrollment penalties are not a concern when the employer plan provides both (a) active employment-based group health plan coverage at a large employer (protecting against the Part B late enrollment penalty) and (b) creditable prescription drug coverage as defined by CMS (protecting against the Part D late enrollment penalty). If the client works for a smaller employer (under 20 employees), or if either of these conditions is not met, different rules apply — those situations require a separate conversation with your licensed agent.
Important HSA eligibility note: Enrolling in any part of Medicare — including premium-free Part A alone — immediately disqualifies the client from making tax-advantaged HSA contributions. A common misconception is that taking free Part A while still on an HDHP is harmless; it is not. Clients who are receiving Social Security benefits are also automatically enrolled in Part A, which ends HSA eligibility.
Important HSA eligibility note: Enrolling in any part of Medicare — including premium-free Part A alone — immediately disqualifies the client from making tax-advantaged HSA contributions. A common misconception is that taking free Part A while still on an HDHP is harmless; it is not. Clients who are receiving Social Security benefits are also automatically enrolled in Part A, which ends HSA eligibility.
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Client Inputs
Investable balance, not cash sweep
Income for IRMAA tier lookup
Employee share after employer contribution
Estimated out-of-pocket spending
Annual employer match or seed (if any) — lost if you leave the HDHP
What the client contributes per year. 2026 IRS limits for reference: $4,400 self-only / $8,750 family, plus $1,000 catch-up at age 55+. Employer contributions count toward the same limit.
Annual rate of return on HSA/investment balances
How many more years of HSA contributions + employer match
Estimated total medical out-of-pocket exposure in retirement, calculated using: Part B premiums (~$2,435/yr in 2026, hard cost), Part D drug costs (capped at $2,100/yr MOOP in 2026 plus plan premium), and plan-specific cost-sharing. Per CMS Medicare Current Beneficiary Survey data analyzed by Better Medicare Alliance (2025), the average MA-only enrollee actually spent $4,967/yr total out-of-pocket in 2022 (vs. $8,248 for Fee-for-Service Medicare). Multiply your estimated annual spend by the client's expected retirement years.
Medicare Path to Compare
2026 avg ~$46.50/mo
Part B deductible + Rx copays
Expected actual spend in a typical year — not the MOOP ceiling. Per the 2025 Better Medicare Alliance analysis of CMS Medicare Current Beneficiary Survey data, the average MA-only enrollee spent $4,967/year total out-of-pocket on healthcare in 2022 (compared to $8,248 for Fee-for-Service Medicare). Note this includes premiums and Part D costs, so actual cost-sharing alone is meaningfully lower. Most enrollees never hit their plan's MOOP ($9,250 federal cap; $5,900 median actual plan limit for 2026).
Cost Summary
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Annual HSA Value (Stay)
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$0
Tax savings + any employer match
Annual Cost Overpay
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Net Annual Advantage
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$0
Of staying on the HDHP
Annual Cost Breakdown
Side-by-side cost comparison of staying on the employer HDHP vs. enrolling in Medicare at the selected path
| Cost Component | Stay on HDHP | Switch to MA |
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Projected Wealth Trajectory
Apples-to-apples comparison of investable wealth under each path. The Stay scenario shows HSA balance with full annual contributions (employee + employer match). The Switch scenario shows existing HSA balance plus a hypothetical retirement account funded with the post-tax equivalent of former HSA contributions PLUS any annual cost savings from switching. Both scenarios assume the same total annual outlay.
Stay on HDHP (HSA + new contributions)
Switch to Medicare (HSA frozen + invested cost savings)
Healthcare cost benchmark
When Does the HSA Stop Making Sense?
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Two different ways to think about diminishing HSA returns. The healthcare-sufficiency tipping point is concrete and intuitive. The mathematical tipping point factors in alternative retirement vehicles and is more rigorous — but assumes the client expects to die with HSA balance remaining.
Healthcare Sufficiency Tipping Point
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Mathematical Tipping Point
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HSA contribution (medical use)
HSA contribution (non-medical, post-65)
Roth IRA contribution
Taxable brokerage
How to read this chart: Each line shows the projected after-tax value at the projection horizon end if you contribute $1 (pre-tax equivalent) at each future age. The HSA wins decisively when used for medical expenses (green). However, once the HSA balance exceeds projected medical needs, additional dollars effectively become traditional-IRA-equivalent (blue line — taxed as ordinary income on withdrawal). When the blue line drops below the red Roth line, the Roth becomes mathematically preferable for new contributions.
Tipping Point Analysis
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Methodology & Sources
2026 Figures Used. HSA contribution limits per IRS Rev. Proc. 2025-19 ($4,400 individual / $8,750 family + $1,000 age 55 catch-up). Medicare Part B standard premium of $202.90/month per CMS announcement Nov. 14, 2025. IRMAA thresholds beginning at $109,000 (single) / $218,000 (joint) MAGI. Medigap, Part D standalone, and MA plan premiums are user-entered and vary significantly by market, carrier, and plan selection. FICA rate of 7.65% applied to payroll HSA contributions. The 'Projected Lifetime Medical Exposure' input is user-entered and represents the client's estimated total out-of-pocket medical costs in retirement, including: Part B premiums (a hard cost of $202.90/month in 2026, plus IRMAA if applicable), Part D drug costs (capped by the Inflation Reduction Act at $2,100/year out-of-pocket in 2026, plus the Part D plan premium), and plan-specific cost-sharing — either Medigap premiums (with minimal residual OOP under most Supplement plans) or Medicare Advantage plan premiums plus copays up to the plan's MOOP. The agent should estimate this figure based on the client's specific Medicare path selection and expected retirement horizon.
Model Assumptions. Assumes the client works for a large employer (20+ employees) with creditable coverage and continues working through the full projection horizon — Part B Late Enrollment Penalty is therefore not modeled. Part B premium and any IRMAA surcharges apply to both Medicare paths. In the Original Medicare path, the model adds user-entered Medigap and standalone Part D premiums. In the MA-PD path, Part D base premium is bundled into the user-entered MA premium (Part D IRMAA surcharges still apply separately). Both employer and employee HSA contribution amounts are user-entered. The agent should ensure the combined total does not exceed the annual IRS limit ($4,400 self-only / $8,750 family in 2026, plus $1,000 catch-up at age 55+). The employer match is treated as a benefit received on the HDHP path and a benefit lost on the Medicare path. The projection chart illustrates a hypothetical scenario in which HSA contributions are discontinued at Medicare enrollment and an equivalent post-tax amount is invested in a generic retirement account — this is illustrative only and not a recommendation for any specific investment vehicle. Existing HSA continues to grow tax-free in all scenarios and can be used to pay Medicare premiums, copays, and qualified medical expenses tax-free. Does not model long-term care, late enrollment penalties, provider network differences, supplemental benefits, state tax variations, or other case-specific factors. Consult a qualified tax professional and financial advisor for investment and tax planning advice.
Reminder. See the disclaimer at the top of this page for full compliance information. Navigate Health Insurance Services is a licensed insurance agency. Chris Cockey is a licensed insurance agent, not a financial planner or tax professional. Calculations reflect 2026 IRS and CMS figures; figures are subject to change. We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer. Please contact Medicare.gov or 1-800-MEDICARE (TTY 1-877-486-2048) to get information on all of your options.