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.
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 (some plans have expanded this to allow you to remain outside of your coverage area for up to 12 months). 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 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.