With a few exceptions for emergency or urgent care, Medicare plans will only cover you within the U.S. and its territories. But should you maintain your coverage when you move abroad? Expert Ron Elledge answers some common questions.
Medicare Enrollment: A Video Update From Our Expert
What is Medicare?
Medicare is the federal health insurance program for people age 65 and over. It also extends to certain younger people with disabilities and those with ESRD (permanent kidney failure).
How Does Medicare Work?
Medicare is divided into parts A, B, C, and D. Parts A and B make up Original Medicare and are usually automatically received at age 65. Part A covers hospital stays, care in a skilled nursing facility, and home healthcare under certain circumstances. Part B covers medical services received from a doctor and supplies that are medically necessary to treat your health condition.
Part C (Medicare Advantage) Plans are a type of Medicare health plan offered by private insurance companies that contract with Medicare. Medicare Advantage Plans provide all of Part A, Part B, and, in many cases, Part D benefits. Some Advantage Plans include worldwide emergency care services as well as dental, vision, gym memberships, and more.
Part D covers prescription drug coverage and must be purchased separately as a stand-alone Part D policy or in a Medicare Advantage Plan (MA-PD).
Medicare Supplement Plans, also called Medigap Plans, are offered by private insurance companies that contract with Medicare. They cover certain healthcare costs not covered by Original Medicare such as deductibles, copayments, and co-insurance. Some Supplement Plans offer worldwide coverage for urgently needed services. Please read the Evidence of Coverage carefully.
What if I plan to be a part-time retiree, living four to six months abroad each year, and then returning to the States for the rest of the year—what should I do about Medicare?
In this scenario, it would be advisable to maintain your Medicare A, B, and either an Advantage Plan or Supplement Plan. The requirements for an Advantage Plan are maintaining active Parts A and B and permanent residency in the plan’s coverage area for a minimum of six months per year. Most Advantage Plans have low or zero premiums and include worldwide emergency medical coverage. The requirements for a Supplement Plan are maintaining active Parts A and B and residency in the issuing state at the time of enrollment. Several Supplement Plans include worldwide emergency services during the first 60 days of each trip out of the U.S. You pay a $250 deductible, 20% of all service costs, and all amounts over the $ 50,000-lifetime maximum. Payment for services is required upfront and proof of payment must be submitted to your carrier for reimbursement.
Whether you maintain a Supplement or Advantage, plan it is advisable to couple it with a medical transport and evacuation policy.
I plan to live full-time overseas—but I suppose there’s always the chance I’ll return to the U.S. when I’m older, if my circumstances change. Is it worth my while to maintain any portion of Medicare, on the off chance that I’ll need it?
There are two basic requirements to maintain Medicare Parts A and B. The recipient must maintain their citizenship or legal status in the U.S. and they must stay current with their Part B premiums. There is no residency requirement for Original Medicare.
In most cases, Part A has no monthly premium and it is expensive to re-purchase later. Therefore, there is seldom a reason to drop your Part A coverage. Part B has an increasing monthly premium which, for the year 2020, has a projected average cost per month of $144.30. However, there are several reasons why I strongly recommend enrolling in and maintaining Part B coverage, whether you are living in the U.S. or overseas, unless you will qualify for a Special Enrollment Period (SEP) upon your return to the States. SEPs are available to those who have maintained creditable medical coverage based on current employment or volunteer work. Those who drop Part B without an SEP will be subject to monetary penalties, extended lapse of coverage, and denied immediate access to Advantage or Supplement Plan coverage upon return to the U.S.
Example 1: Janice Smith loses her husband while living in Thailand. She decides to return to the U.S. and live out her days close to her children and grandchildren. Because she has kept both Parts A and B, she will have first-day coverage upon her return to the U.S. with no penalties or premium increases. She can immediately apply for an Advantage or Supplement Plan (depending on her health) and be covered the first day of the following month. If she applies for an Advantage Plan on June 30, she will be covered on July 1.
Example 2: While living in Thailand, Janice and her husband decide to discontinue their Part B coverage. Janice loses her husband while living in Thailand. If she returns from Thailand after March 31st, she must wait until the General Enrollment Period, which runs from January 1 through March 31 each year, with coverage beginning July 1. She will pay a Part B Late Enrollment Penalty, which will be added to her monthly premium for as long as she has coverage. Janice will also have to undergo health underwriting if applying for a Supplement Plan.
I plan to be a “roving retiree” and spend a few years traveling in retirement before returning to the U.S., at which point I might spend part of the year away and part of it Stateside. What should I do about Medicare?
Balancing the cost of maintaining Medicare coverage while living and traveling outside of the U.S. is based on individual circumstances and therefore the decision is personal to each of us. However, certain principles apply to most situations.
It is important that the “roving retiree” maintains Parts A and B and continues payment of their Part B premium.
While Advantage Plans won’t cover full-time overseas living—because they require continued residence in their plan area—they do have an extended coverage period of up to six months or a year when traveling out-of-country. This means that part-time expats and frequent travelers can use it as emergency coverage while they’re abroad. Many come with $0 or low-cost premiums.
Roving retirees can keep their Supplement Plan in force even while living overseas. The advantages include access to worldwide emergency traveler coverage for the first 60 days of any trip out of the U.S., being fully covered in the event of an emergency return to the U.S., and no health underwriting for a Supplement Plan upon return to the U.S. The disadvantage is in the cost of continuing to pay the Part B and Supplement premiums while out of the country. If you discontinue Part B, the Supplement would be terminated, and you would face the same delays for coverage and monetary penalties seen in Example 2 of Janice Smith living in Thailand.
Do I have to maintain an address in the U.S. in order to maintain Medicare coverage? If I am resident in Costa Rica, say, and I’ve arranged my finances such that I no longer have a state income-tax liability (because I left the U.S. from Florida, which doesn’t have a state income tax)...do I still need to maintain some sort of Florida address in order to maintain my Medicare coverage?
Address Requirements: A residential address is required for enrollment in all Advantage, Prescription Drug, and Supplement Plans. However, you can also have a P.O. Box as a mailing address. In most cases the P.O. Box will be enough to maintain Supplement coverage while overseas. Please check with your carrier before leaving the U.S.
Residency Requirements: First, eligibility for Medicare A and B are not dependent on U.S. residency, only citizenship. Therefore, you may maintain both A and B while living overseas. Second, eligibility for Medicare Advantage and Prescription Drug Plans require permanent U.S. residency, so you cannot maintain them while living permanently overseas. Third, Medicare Supplement Plans are only dependent on residency at the time of enrollment. If you were a resident of Florida at the time of purchase, you may maintain it while overseas. However, if you were a resident of Costa Rica at the time of purchase, you have violated the enrollment requirements and may suffer the consequences of denial of claims for falsifying an enrollment form.
A tax problem may come if you claim residency in the U.S. to maintain an Advantage or Prescription Drug Plan and claim Costa Rica residency to avoid paying state taxes. In the case of a state with no income tax, this is a moot point. However, you may be denied claims when using your plan on return trips to the U.S. and could find yourself at odds with the Medicare Fraud, Waste and Abuse laws.
Medicare rules and regulations are highly complicated, continually changing, and dependent on proper timing and execution to be compliant. It is best to seek counsel from a competent Medicare expert or agency when making these critical decisions.
Ron Elledge is a Senior Market Insurance Agent with more than a decade’s experience. He is the author of the book “Medicare Made Easy,” available here.
Five Reasons Why Expats Should Enroll in Medicare
Everyone has their own healthcare strategy, particularly when they become an expat. That said, I want to offer my top five reasons I believe everyone, including full-time expats, should enroll in Part A and Part B of Medicare as soon as they become eligible.
Medicare is an endless maze of rules and regulations, but at its core, it is designed to cover as many people over 65 as possible.
Let’s begin by looking at the qualifications for eligibility. In order to qualify for Medicare, you must be 65 or older and a U.S. citizen or permanent legal resident for at least five consecutive years. There is no residence requirement for Part A or Part B for citizens. It is also available to those who are disabled and receiving Social Security Disability for 24 months, or who have end-stage renal disease (ESRD) or Lou Gehrig’s disease (ALS).
You may also enroll if you have been married to a qualified beneficiary for at least one year before applying. You may also be eligible if you are divorced from a qualified beneficiary to whom you were married for a minimum of 10 years and you are single at the time of application.
Reason #1: You Worked Hard for it; You Should Use it.
If you are one of the above individuals, and you or a spouse have worked and paid Medicare taxes for 40+ quarters during your lifetime, you have become eligible for premium-free Part A of Medicare. Be aware that if you fail to enroll when you’re first eligible, you will incur a Part A Late Enrollment Penalty if you choose, at some later point in time, to enroll in Part A after all.
As for Part B, you’re also eligible for that, for the same reason: By working for 10 years, or 40 quarters during your lifetime, you have the right to enroll in Part B.
Part B is the portion of Medicare that provides financial help for visits to the doctor, outpatient services, and medically necessary treatments. Preventative care is often included, too. It’s not free, though. The standard Part B premium for 2020 is $144.60 a month.I always advise everyone to enroll in Part B.I always advise everyone to enroll in Part B as soon as eligible, unless you or your spouse have employer coverage for current work, or if you volunteer internationally for at least 12 months for a tax-exempt non-profit organization and have health insurance during that time. (In these cases, you will be eligible for a Special Enrollment Period which will allow you to enroll in Part B with no delays or penalties once your employer coverage or your volunteer mission ends.)
Reason #2: Medicare Parts A and B Become Your Advocate.
When you are enrolled, Medicare negotiates with hospitals, clinics, doctors, and other service providers for all qualified medical expenses. When a bill is submitted to Medicare, they determine if it is a Medicare-approved service. If it is deemed to be an approved service, Medicare will then determine the approved amount, which is seldom over 60% of the billed service and is often much lower. Medicare then pays its 80% share of the approved, and the remainder is the responsibility of the beneficiary.
This negotiation power is far greater than an individual can achieve on their own. Those expats living outside the U.S. who are taking part in their in-country health coverage, and have not enrolled in Part B, will seldom have coverage when visiting the U.S. They should obtain travel insurance for their U.S. visits or they place themselves in danger of financial disaster.
Let me offer an illustration: Suppose that, because John is covered by Mexico’s government healthcare plan, he has decided not to enroll in Medicare Part B at this time. He returns to the U.S. to visit relatives and has an accident while hiking with friends in the national forest.
John is flown by helicopter to the nearest hospital emergency clinic where he undergoes testing, doctor evaluations, and finally an operation to set his badly broken leg. Unless he is admitted to the hospital as an in-patient, all his care is covered under Part B of Medicare, which John has declined.
Let’s assume that the total charges come to $20,000 for John’s treatment. If he had Part B of Medicare in force, his responsibility for service would be calculated as follows: $20,000 is the billed amount.
However, the Medicare Approved Amount is 60% of $20,000, or $12,000. Of this $12,000, Medicare will pay 80%, or $9,600. This leaves John with a bill for $2,400 for all services. However, because John has no Part B coverage, his total responsibility is $20,000. Good luck with the negotiations, John!
Reason #3: You Will Avoid Future Penalties.
If you do not enroll in Medicare Part B during your Initial Enrollment Period, and you do not qualify for one of the Part B Special Election Periods, you will incur Part B Late Enrollment Penalties if you choose to enroll at a future time.
The Part B Late Enrollment Penalty accumulates by 10% for every full 12-month period in which you have not had Part B coverage after your Initial Enrollment Period passes. It is calculated by multiplying this percentage by the current National Base Beneficiary Premium, which is $144.60 in 2020.
If you fail to enroll for five full years, you will incur a Late Enrollment Penalty of 5 years x 10%. That comes to 50% of $144.60, which is $72.30. This penalty is recalculated yearly by Social Security and is assessed every month for as long as you have Part B coverage.
Reason #4: You Will Avoid Delayed Coverage.
If you miss your Initial Enrollment Period, you will be required to enroll during the General Enrollment Period, which runs from Jan. 1 through March 31, with coverage beginning July 1. The ramifications of this can be catastrophic for those returning to the U.S. from living overseas.
Let me illustrate: While John and Mary are living overseas, they decide to forego enrollment in Medicare Part B. However, when John passes away, Mary decides to return to the States to be close to her children. Upon Mary’s return, she will be required to enroll during the General Enrollment Period, and her coverage will begin on July 1.
Let’s assume that circumstances make it necessary for Mary to return to the U.S. on April 15, 2020. Because the General Enrollment Period for 2020 ended March 31, she is ineligible to enroll until next January, with coverage beginning July 2021.
This leaves her with a 15-month period in which she will have no Part B coverage and, because she is not eligible for Part B, she is not eligible to enroll in a Supplement (Medigap) or Advantage Plan.
Mary will be living in the U.S. and have no medical coverage for the entire 15 months.
This delay comes at a time in life when Mary will most probably need the coverage and be the least likely to qualify for alternative insurance. The problem of delayed coverage could far outweigh the penalty incurred for late enrollment.
Reason #5: Medicare Advantage and Medicare Supplement Plans.
Medicare Supplement Plans offer a large range of benefits and services, but you’ll need to be enrolled in Medicare Parts A and B to be eligible for them. For Medicare Supplement and Medicare Advantage Plans, the applicant must be enrolled in both Parts A and B at the time of application. This means that if you are unable to enroll in Part B for 15 months, as illustrated above, you are ineligible to enroll in either of these plans until your Part B becomes active.
However, if you are enrolled in Part B while living overseas and return to the States, you may immediately apply for Medicare Advantage or Supplement coverage. In the case of Advantage Plans, if you are free of end-stage renal disease (ESRD), coverage may start the first day of the following month in which you enroll. If you enroll on April 28, your coverage will start May 1.
Because our futures are ever-changing, based upon fluctuating circumstances in life, I recommend to every individual who will not qualify for a Part B Special Election Period in the future to enroll in Parts A and B of Medicare. Do it when you first have the opportunity during your Initial Enrollment Period.
Medicare, Parts A and B: don’t leave home without them.
WHAT IS A HEALTH SAVINGS ACCOUNT?
It’s my belief that everyone should enroll in Part A when they first become eligible, with one exception. The exception is for those who plan to continue contributing to a Health Savings Account (HSA).
Health Savings Accounts are tax-free accounts for individuals with high-deductible health plans (HDHPs). The funds contributed are not taxed when deposited or when withdrawn, as long as they are used to pay for qualified medical expenses.
However, if you enroll in Medicare Part A and/or Part B, you are no longer eligible to contribute pre-tax dollars to your HSA, but you may continue to withdraw funds for qualified medical expenses. This is because those participating in an HSA are not allowed to have any insurance, other than their HDHP.