Maintaining Healthcare Insurance as a Retiree Abroad
A common challenge faced by U.S. citizens who retire abroad is how to access healthcare insurance in their new country of residence. While it’s possible to qualify for Medicare as a U.S. expat, your overseas benefits may be extremely limited.
Medicare requirements for U.S. expat retirees
U.S. expats eligible for Medicare typically must meet two basic requirements to maintain Part A and B coverage:
- Maintain citizenship or legal status in the United States
- Remain current on Part B premiums
Deciding whether to maintain coverage
It’s important to understand that Medicare typically doesn’t provide coverage for healthcare expenses incurred overseas. This means you may need to enroll in private insurance or your country of residence’s public healthcare system (if eligible).
There’s no late enrollment penalty for Medicare Part A if you qualify for premium-free coverage. However, you may face a late enrollment penalty if you’re subject to Part A premiums, let your benefits lapse, then purchase coverage at a later date. In this scenario, it may make sense to maintain Part A coverage while living overseas.
On the other hand, Medicare Part B requires retirees to pay a monthly premium to maintain coverage. While this may seem like an unnecessary expense due to a lack of overseas coverage, it often makes sense to continue paying premiums to maintain Part B coverage.
If you ever plan to return to the United States, you’ll have a one-time special enrollment period to enroll in the remaining pieces of Medicare coverage. This special enrollment window will last 63 days from your move date. Please note there could be the risk of a late enrollment penalty for Medicare Part D; however, you can attempt to appeal it. Medicare supplement plans won’t have a special enrollment period, and you may need to qualify through health underwriting.
Consider the following examples.
- Scenario 1 – Susan and her husband are U.S. expats living in Spain. While there, Susan’s husband passes away. Susan decides to return to the United States to be closer to family. Because she maintained Medicare Part A and B coverage the entire time she lived overseas, Susan is eligible to set up Part D drug coverage on the first day she returns stateside — but there may be a risk that she’d incur a late enrollment penalty. She can also apply for a Medicare supplement plan and, assuming she meets the necessary eligibility requirements, start the coverage immediately or on the first of the next month. Many Medicare supplement carriers can start providing coverage on the day of the application being submitted. It may take a few days or a few weeks for the policy to be approved, but once approved the coverage would be retroactive.
- Scenario 2 – Susan and her husband decide to discontinue their Medicare Part B coverage after retiring in Spain as U.S. expats. When her husband passes away, Susan returns to the United States and must wait until the Medicare general enrollment period to receive coverage. She’s also subject to a Part B late enrollment penalty, which is added to her monthly premium for as long as she has coverage. In this scenario, because her Medicare Part B coverage has a new effective date (as she waited for general enrollment), Susan will have a new open enrollment window and can qualify for a Medicare supplement plan without going through medical underwriting.
- Scenario 3 – Susan is a non-U.S. citizen and her husband, who is an American citizen, passes away. Because her husband qualified for Social Security and they were married for at least one year, Susan may be eligible for Medicare as a non-U.S. citizen spouse, depending on her specific situation.
Susan’s hypothetical situations highlight the advantage of maintaining Medicare coverage, whether for herself or as non-U.S. citizen spouse, if there’s a possibility she may decide to live in the United States in the future.
Considerations for those not eligible for Part A coverage
If you don’t meet the eligibility requirements for premium-free Part A coverage (which typically means you or your spouse didn’t pay Medicare taxes for at least 40 quarters), you might still be able to enroll in Medicare Part A and Part B — however, you would need to pay premiums for both parts. You can confirm this through your local U.S. Embassy.
If you were living outside the U.S. when you turned 65 and don’t qualify for Social Security benefits, then upon returning to the United States as a permanent resident, your special enrollment period will begin (lasting for three months). Your coverage begins on the first day of the month after you enroll.
If you don’t enroll within the three-month window, you may be subject to a late enrollment penalty. The penalty is 10% of the Medicare premium cost (be aware that premiums can change every year). For 2023, the Part B cost is $164.90 and Part A can be between $278 and $506 (depending on how many credits you have).
For 2024, Medicare premiums will be as follows:
- If you don’t qualify for premium-free Part A, your Medicare premiums can be between $278 and $505 a month.
- For Part B, your premiums will increase to $174.70.
Please note, if you’re a U.S. expat who qualifies for an income-related monthly adjusted amount (IRMAA), the penalty will factor in that surcharge as well.
You may be eligible to delay enrolling in Medicare Part B and avoid both premiums and a late enrollment penalty if you have health insurance coverage from any of the following and are actively working or volunteering:
- A sponsoring organization of volunteer service
- An employer for which you or your spouse actively work that provides creditable group health insurance coverage
Once you stop working and are no longer eligible for coverage, Medicare allows for an eight-month special enrollment period (SEP), during which time you can enroll without triggering a late enrollment penalty. If you were previously receiving coverage as a volunteer, the SEP is reduced to six months.
If you stop working/volunteering and don’t return to the United States during your SEP, you’ll face the same dilemma as other expat retirees in that you must decide whether to sign up for Part B and pay premiums or let your coverage lapse and face permanent late penalties when you return to the United States.
Could you use some help navigating your Medicare options as a retiree abroad? Creative Planning International is here for you. We work with cross-border families and non-citizens to help maximize their wealth and avoid costly mistakes. As expat fiduciary advisors, we understand the complexities faced by non-residents who have worked in the United States or are married to U.S. citizens. For help navigating your Medicare options, request a meeting with a member of our team.