An individual who is entitled to Medicare Is not HSA-Eligible. There’s more to it though. An individual can become entitled to Medicare benefits for three reasons: age, disability, or end-stage renal disease (ESRD). Entitlement to Medicare Part A is automatic for some individuals (i.e., a separate application is not required) because they have already applied for and are receiving Social Security or Railroad Retirement Act benefits. Other individuals must file an application in order to become entitled to Part A benefits. Note that mere eligibility for Medicare benefits (without enrollment) will not disqualify an individual from HSA eligibility.
The terms “eligible” and “entitled” are not synonymous under the Medicare regulations.* To be entitled to Medicare, an individual generally must be both eligible and enrolled. Medicare enrollment is automatic for some individuals (e.g., individuals who are receiving Social Security benefits); they simultaneously become eligible, enrolled, and entitled. Other individuals are eligible for Medicare but must file an application in order to be entitled to benefits (e.g., working individuals beyond age 65 who are eligible to receive Social Security benefits but who have not applied for them). For HSA purposes, Code §223(b)(7) states that an individual’s contribution limit becomes zero “for the first month such individual is entitled to benefits” under Medicare. IRS Notice 2004-50 and IRS Notice 2008-59 clarify that mere eligibility for Medicare does not make an individual ineligible to contribute to an HSA and that a Medicare-eligible individual who is not actually enrolled in Medicare Part A, Part B, Part D, or any other Medicare benefit may contribute to an HSA until the month that he or she is enrolled in Medicare.