EFAM | Escape From America Magazine

Medicare and You – The American Expat

Medicare can be an expensive annoyance or an ineffective solution to a genuine problem

Medicare is the government sponsored social insurance program, which provides health care insurance coverage to eligible individuals in the US – such as those who are over the age of 65 for example.  It came into being following the signing of the Social Security Act into law in 1965, and it’s fair to say that it has its opponents as well as its supporters.

Part of the key concept behind the creation of the Medicare system was to ensure that more vulnerable individuals were not left without access to medical care in later life for example.

In part the system is funded and financed through payroll taxes, with eligible individuals also required to contribute if they have not paid enough contributions whilst working, or if they would like to have access to additional benefits not covered by Part A of the Medicare system, which covers hospital insurance only.

Very generally speaking, everyone over the age of 65 who has been a legal resident of the United States for at least 5 years is eligible for Medicare.  Note however: those who are eligible because of their age but who have not paid enough in Medicare taxes, (currently 10 years or 40 quarters), or whose spouses have not paid enough, must pay a monthly premium to remain enrolled in the Medicare system.

For Americans living and working abroad and US citizens who plan to retire overseas, Medicare can be an expensive annoyance or an ineffective solution to a genuine problem…and whilst there are those who are campaigning for significant changes to make Medicare available to all eligible American citizens no matter where in the world they choose to live, the reality is that currently Medicare is only available – and of any use – if you’re actually living in America.

Medicare and You – the American Expat Retiring Abroad…

If you and/or your spouse have lived and worked legally in America and paid US taxes for at least the last 10 years, you are most likely to become eligible for Medicare coverage when you hit 65.  For most eligible people Part A (hospital insurance) is free of any monthly premium.  You can choose to add on parts B (medical insurance) and D (prescription drug insurance) for additional premiums which will be deducted automatically from your Social Security payments (if you’re eligible to receive these).

However, if you’re planning on retiring overseas, you get zero Medicare coverage abroad despite the fact you have been paying your taxes and contributing directly toward the system all your working life.  (The only advantage is that you do not have to continue paying into the system in the form of premiums for additional benefits such as parts B and D as mentioned above.)

This is seen as one of the largest injustices facing American citizens who choose to exercise their right to freely live where they want when they come to retirement age…

The argument the government continually regurgitates when challenged on this issue is one they first came up with in 1979, namely: “There are two primary difficulties in extending Medicare services abroad: (1) determining reimbursement rates for foreign services; and (2) ensuring compliance with Medicare standards by foreign medical personnel and facilities.”

However, this argument didn’t hold much water back then, and it certainly doesn’t today because there is already a working model in place to deliver the insurance benefits to those who are eligible and who are living abroad…namely TriCare, the model used to support and reimburse US military personnel and their dependents who are resident overseas.

Currently there are thousands of American citizens retired abroad who would be eligible for Medicare if they lived in the United States, but who have contributed for a significant proportion of their lives to a system which provides them with nothing now that they live abroad.

If you would like to benefit from Medicare you have two choices: 1. Return to America to live permanently or 2. Return to the US if you require medical treatment…

Naturally neither option is ideal for those who want to live abroad permanently in retirement.

Additional points for you to consider include the fact that if you want Part B coverage as a US citizen retired overseas you can have it by paying a monthly premium.  However, as Medicare benefits are only available inside America it can make little sense to continue to pay a monthly premium for a service that’s not actually available to you.

So, you may decide not to enrol in Part B or just drop it as soon as you move abroad – however if you do this and then return to live in America at some point in the future if your plans or circumstances change, you will be required to enrol again and then pay a premium that is 10% higher for each 12-month period that you did not have coverage.  What’s more, you can only re-enrol between January and March in each year, with your coverage not resuming until July of that same year.

Health Insurance Options for You – the American Expat Retiring Abroad…

Whilst you may choose to add your voice to the active campaigns in place to extend Medicare benefits to Americans retired abroad, you also have to find a way to fund your medical care once you retire overseas.  The good news is that there are international health insurance companies as well as national companies in many nations around the world which will all offer you insurance coverage.  The bad news is that medical insurance is nothing if not expensive – particularly for those living on a fixed retirement income and for those over the age of 55.

Your only two real options are: -

-       Self-funding your medical care on an ‘as-required’ basis using your saved and invested retirement wealth or monthly Social Security or pension income.  Advantages include having no outlay as long as you’re healthy.  Disadvantages include having the uncertainty of what you may need to afford in later life, as well as perhaps not having enough money to pay for critical care.

-       Buying a level of insurance coverage to suit your affordability constraints as well as your potential requirements.  Advantages include having the peace of mind that you will be looked after should you fall ill.  Disadvantages include the fact that insurance premiums become more expensive and restrictive as we age.

Medicare and You – the American Expat Working Abroad…

According to IRS.gov: “If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad.  Your worldwide income is subject to U.S. income tax, regardless of where you reside.”  However, the following is also true: if you are living permanently abroad and an employee of a foreign employer and are subject to foreign laws governing their social security tax, you are not required to pay US Social Security tax such as Medicare taxes.

For Americans determined to remain abroad into retirement this means that they effectively avoid having to pay taxes towards a service that they will never benefit from…however, as we all know, plans can change.  If the plan in question means that the American currently living abroad and legitimately avoiding having to pay towards Medicare one day returns to the US in retirement, they will have to pay a huge premium to gain access to just the most basic element of Medicare, namely Part A.

There are those who may choose to make voluntary contributions towards Medicare as a result, even though they are living and working abroad.  Your situation and the choices you make will of course depend on whether you believe you will one day return to American shores and benefit from the Medicare solution.

For more information about Medicare there is a dedicated government website: -

http://www.medicare.gov/

For more information about your tax status as a US citizen living abroad visit: -

http://www.irs.gov/

And if you would like to know more about the ongoing fight for retired Americans to be granted access to Medicare even if they are living abroad, see the Medicare and Health Care section on: -

http://www.aca.ch/

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16 Comments

  1. Greg Hadaller June 4, 2011 at 10:23 am

    This is a very, very well written article.
    Thank you Susan Beverley!

    • Susan Beverley June 21, 2011 at 2:46 pm

      Thank you for your feedback Greg,

      I researched and wrote the article in response to an EFAM reader request.

      I am always happy to hear what our subscribers would like to read here and will do my best to oblige.

      Regards,

      Susan Beverley – Editor EFAM

  2. steve devitt June 8, 2011 at 4:05 am

    This article skips a very important fact. For the most part, health care is affordable in many countries. I have lived in Mexico, China and Nigeria, and health care was affordable enough to handle out-of-pocket costs. I have also received health care in Thailand. I would say the treatment I was given in Mexico, China and Thailand was actually better than what I received in the states.

    For instance, I was working in New Mexico in 2002 and had 50/50 dental insurance which also included a free yearly check up. When I went to a dentist in Albuquerque, he checked me out, and then came in and said, “You need $12,000 worth of work, and we will start justs as soon as you give us $6,000.” In the following year, I had that work done in Mexico and China, all for less than $1,000. In Nigeria I have had four root canals, for less than $400. A single root canal with a cap will run $1,750 in the states.

    I was working in Montana in 2005 and came down with walking pnuemona. I went to the doctor, who gave me a prescription (cost about $10), but the office visit was slightly more than $100 and the x-ray was $200. Two weeks later I had not imporved so I went back for a second visit, with another X-ray, but he would not prescribe any more medication. So I was out $600 with no real help. That summer, I visited China and finally got rid of it for less than $10.

    Most people who live outside the United States scratch their heads when they see the massive arguments about health care. It will never be solved until the country faces the central problem. Greed.

    • Phil January 13, 2012 at 9:03 pm

      Steve’s comment is spot-on. I have lived abroad in the Philippines for over 2 years. At first, I was concerned about receiving healthcare in a 3rd world country. After a few hospital visits, I am amazed at the quality of service. It seems much better than the US. Emergency rooms don’t have long queues and the costs is about 10% of what we pay in the US. GREED is the root of the problem with US healthcare. The rest of the world shows that basic healthcare can be affordable. Now, many will argue that if you need something really sophisticated, it is best to have it done in the US. I don’t disagree normally. Investment has been made and the US tends to lead in medical advances. But, the rest of the world quickly has the same talent or technology, at far less cost. Also, the US often has the leading advances because of our university research system. So much of this is taxpayer funded (and worth it). So why do American citizens have to pay immorally high charges to avail of these services? Again, GREED. Not free market capitalism. GREED. I get annoyed hearing so many Americans complaining about President Obama’s attempt to fix healthcare. They act as if it was not broken. My only complaint is that it does not go far enough. Healthcare needs to be socialized. The cost of a little gov’t inefficiency will be far less than the GREED that is currently driving the system and bankrupting many American families. This is so obvious once you leave the US. Wish everyone could have this experience and see it the same way.

      • John August 9, 2012 at 9:12 am

        Another agreement. I’m retired and live in both Switzerland and the USA. In a nutshell Medicare is nothing more than a reflection of how out-of-control the entire US medical care system is. Compared to Switzerland it appears to be a plan authored and implemented by people who probably would serve the country better being on Welfare. If you are on Part D, ask yourself how many different organizations get involved with handling your payments. In my case 5. My guess is they all cost far more than the drugs cost. Judging from the Swiss prices on the same drugs, a lot more than the drugs cost. Part B would cost me a bit less that 4 times the cost of both Part A and B coverage in Switzerland. Where I might note I have spotless hospitals, filled with the latest technology and highly competent doctors from around the world. A doctors visit can easily result in a invite to simply sit down in an office and have a chat over an espresso. Try that in the USA.

        Medicare is simply a way for the entrenched to remain entrenched. If the government wanted to help Americans, it should simply copy what other have done far more effectively. But then how would the pols collect campaign contributions? How would the lobbyists survive?

    • vikingvista November 8, 2012 at 4:39 pm

      That was great comment regarding details of several anecdotes regarding pricing in different countries. Along with others that I have read, it does seem as though equivalent quality basic health care services, on average, in places like Thailand are considerably cheaper than in the US.

      But greed cannot possibly be the problem. Thais, Mexicans, and Nigerians, are no more or less greedy than Americans. They all possess the same greed, which is the same motive you yourself had for seeking lower prices in those countries. Humans are and always will be human. Greed is a constant.

      The explanation of prices can only be found in economics. For the most part, supply and demand determine prices in both Thailand and the USA. In every case, prices would be lower if demand were lower and/or supply were higher. If you compare supply and demand factors between countries with widely different prices, you will see things like large demand subsidies (e.g. Medicare or Medicaid benefits), supply restrictions (e.g. Medicare funding limits almost all US residencies), incentives to demand inefficient and overpriced care (e.g. third-party financing), effective taxes on supply (e.g. large litigation costs, mandatory licensing). Litigation costs also effect rigid standards of care. E.g., the standard of care for delaying some outpatient diagnostic imaging in Canada may be months, while in the US it is days. Both are wrong. Customers should have a spectrum of choices of various qualities available to them, but priced accordingly.

      In short widespread cultural attitudes regarding what the law should forcefully inhibit or impose, as well as widespread tastes and expectations, do have significant effects on scarcity, and therefore on prices. But blaming human greed for prices you don’t like makes as much sense as blaming the Krebs cycle.

  3. Diane Siriani July 25, 2011 at 10:11 am

    Nice Post. I have many years filling Expatriate Tax Returns. If anyone reading this post ever has any questions, feel free to visit my

    website.

  4. Diane Siriani July 27, 2011 at 10:17 am

    Great Post. Love the blog.

  5. David September 20, 2012 at 2:13 pm

    I am an American citizen, working full-time for a foreign organization in a foreign country. I want to be eligible for Social Security and Medicare when I retire and return to live in the US. You mention that there is an option to make voluntary contributions to assure eligibility. Can you explain how to do this or direct me to the source of information on this. I can find nothing on the web. Thanks.

  6. Philip C. Brown January 3, 2013 at 2:18 pm

    Dear Susan,

    I came to Peru as I couldn’t afford to live in the USA on only my SS Disability check; I qualified for a Medicare Advantage Plan & the State of PA was paying my Part B premium. I was going to spend 5 months looking for a position teaching English; as I want to feel that I have some “worth”. I came in May & am still here.

    When I left PA; I changed my address to that of my POA, also in PA. The insurer sent a notice about the change and same was filled out. I never heard anything nor was advised about staying more than six (6) months as:

    1. My Dec. check was deducted $199.90; apparently 2 months premium (@ $99.90) for Part B. I have since dis-enrolled at the US Embassy in Lima on Dec. 21.

    2. My January check was deducted $88; I have no idea what this amount represents. I am not sure when the 1.7% for inflation is received.

    My point is that my DISABILITY is for severe ANXIETY & DEPRESSION; why isn’t it mandatory that the insurer contact people & make it ABSOLUTELY CLEAR of these fees. Social Security is difficult enough to a person that is considered “normal”; the PA Ins. Dept. has been of no help & suggests I contact SS directly. This is not easy when the local phone provider doesn’t permit calls/faxes to USA. I have since found that Costa Rica is responsible for SSA matters in Peru; I emailed them this morning.

    Hopefully you can make my new year one of less DISTRESS,
    Philip C. Brown
    Happy New Year & keep up the great work…

    PS – what is “comment moderation is enabled…”

  7. Jane January 18, 2013 at 12:20 am

    I on the other hand want to dis enroll from Part A and Part B of Medicare b/c I permanently live in Italy and am married to an Italian. I am covered under his insurance.

    I have no desire to live in the USA Why do I lose my social security if I choose to live outside the USA?

    • Gabriel Heiser May 23, 2013 at 11:58 pm

      You don’t lose your Social Security, even if you live outside the U.S. It’s only Medicare/Medicaid that you give up in such cases.

  8. Elaine Terlinden February 19, 2013 at 3:24 pm

    Re after age 65 Medicare late enrollment and 10% penalty, for those returning to the U.S., I believe the above article’s paragraph (as follow) is NOT correct.

    “So, you may decide not to enrol in Part B or just drop it as soon as you move abroad – however if you do this and then return to live in America at some point in the future if your plans or circumstances change, you will be required to enrol again and then pay a premium that is 10% higher for each 12-month period that you did not have coverage. What’s more, you can only re-enrol between January and March in each year, with your coverage not resuming until July of that same year.”

    I understand, from the following sources, that they would be eligible for a Special Enrollment Period, and not be subject to the 10% penalty premium:
    1. from someone with the Federal Benefits office (Frankfurt Consulate) that a SEP is available to people who make a permanent move outside their Medicare plan’s service area; have a new plan choice available to them as a result of their move to a plan’s service area; move back to the U.S. after living outside the country …

    2. from the Center for Medicare and Medicaid Services (CMS) Program Operations Manual System (POMS) HI 00805.266 titled “Description of Terms Used in the Special Enrollment Period and Premium Surcharge Rollback Provisions” – at https://secure.ssa.gov/poms.nsf/lnx/0600805266.

    Also please note that ACA’s January 2013 FAQ article (last Q&A) – online at http://americansabroad.org/issues/healthcare/medicare-faq/ – also mentions this SEP; however, re the(ir) answer’s “(not being self-employed), I would not agree … do think the SEP would include those self-employed, i.e. HI 00805.266 says “including a self-employed individual”.

    Please do let me know if you do not think that this is right.

    Best,

    Elaine Terlinden

  9. Margie June 26, 2013 at 10:18 am

    my father recieved this letter in the mail stating :

    Based on the inf0.we have,we can pay benefits beginning april 2013. WHAT WE WILL PAY & WHEN 1.you will recieve $ 1,054.00 around june 13,2013.
    2.this is the money you are due through may 2013.
    3.you will recieve $527 for june 2013 around july 3,2013. 4.after that you will recieve $527.00 about the third of each m0nth.

    why does ssi deduct this amount$527 from my fathers pension…. I dont understand why half of my fathers pension is deducted if he did not sign for medical [premuim deductuions. He is now living in the philippines and I am trying to help him. Please let me now what can my father do to avoid this deductions?

    • Margie June 26, 2013 at 10:21 am

      Your comment is awaiting moderation.

      my father recieved this letter in the mail stating :

      Based on the inf0.we have,we can pay benefits beginning april 2013. WHAT WE WILL PAY & WHEN 1.you will recieve $ 1,054.00 around june 13,2013.
      2.this is the money you are due through may 2013.
      3.you will recieve $527 for june 2013 around july 3,2013. 4.after that you will recieve $527.00 about the third of each m0nth.
      Informati0n about medicare: Since benifits are again payable we will resume witholding your medical premiums due to date.We are deducting past-due premiums from your check.

      why does ssi deduct this amount$527 from my fathers pension…. I dont understand why half of my fathers pension is deducted if he did not sign for medical [premuim deductuions. He is now living in the philippines and I am trying to help him. Please let me now what can my father do to avoid this deductions

  10. Bernhard January 23, 2014 at 11:52 pm

    I am a 50 yr old US Citizen living abroad and working for a local company. Consequently, I pay no SS nor Medicare taxes although I very much would like to have the respective benefits once reaching 65. I have recently heard that an expat can make “voluntary contributions” to Medicare, is this correct? If so, how do I go about it? Lastly, could I make similar contributions to SS?
    Thank you.

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