The right strategy will help clients avoid penalties that can last a lifetime
Jul 22, 2015 @ 10:48 am
By Katy Votava for InvestmentNews
More and more Americans are living abroad for extended periods of time. People may either be employed or retired in a foreign country as they approach Medicare eligibility and beyond. To preserve access to Medicare benefits without costly delays and penalties when returning to the U.S. for short- or long-term stays, expats — whether working or retired — need to keep a few critical issues in mind.
The general rules of Medicare eligibility, enrollment periods and penalty rules apply regardless if a person resides in the United States or a foreign land. People need to enroll in Medicare on a timely basis unless they qualify for a future special enrollment period, regardless of where they are. If they do not apply for Medicare on a timely basis and are not eligible for an SEP they will have to wait to apply during the Medicare general enrollment period from Jan. 1 through March 31 of each year, with coverage beginning July 1 of that year. The consequence is that their access to Medicare coverage will be postponed for a period of months during which time they will have to pay for health care in full as well as pay lifelong penalties.
The easiest way to figure out how to help your expatriate clients is by examining the impact on Medicare Parts A, B and D individually.
Medicare Part A (hospital, limited home care, rehabilitation and hospice)
People need to enroll in Medicare Part A during their initial enrollment period, which is the seven months around their 65th birth month. (The three months before and the three months after.) There is no fee for Medicare Part A for the majority of enrollees. Therefore, most expats should sign up for Part A whether they’re living aboard or not and avoid late enrollment issues down the road. Their next opportunity to join is during the GEP.
Medicare B (outpatient services)
Individuals also need to enroll in Medicare Part B during their IEP unless they are SEP eligible. Medicare Part B requires an annual income-related premium of $1,260-$4,030 per person or $2,520-$8,060 per couple. It is important to determine if your clients are SEP-eligible and can forgo Part B coverage and cost to a future date. The two major to criteria that allow for a delay or discontinuation of Part B while abroad are:
Health coverage from an employer, an employed spouse or National Health Service that is primary to Medicare.
The Part B SEP can be used at any time during those coverages and up to eight months after the employee stops working or health coverage ends.
Volunteering internationally for a tax-exempt nonprofit organization that offers health cover.
The volunteer period has to last at least 12 months and there is a six-month Medicare SEP when volunteer work stops, or health insurance ends, whichever is earlier.
If your client delays joining Medicare Part B until returning to the U.S. without SEP eligibility, they will pay a 10% per year penalty for every year without Part B coverage. That penalty can be costly and is paid in perpetuity on top of regular premiums.
Medicare Part D (prescription drugs)
Medicare Part D is only available while residing in the U.S. Individuals can join Medicare Part D or a Medicare Part C plan that includes prescription drug coverage under SEP rules within two months of returning to the States. If they do not, they will pay a lifelong penalty of 1% per month of the premium amount for every month they were eligible for prescription drug coverage and did not enroll.
It is easy to shop and apply for Part C or D coverage via www.medicare.gov. I recommend that folks do that in advance of returning to the U.S. to avoid coverage lapses and limit unnecessary out-of-pocket costs. Part C or D coverage is month-to-month, does not require a long-term commitment and can be canceled when the person goes abroad in the future.
When military retirees and spouses reach 65, they are entitled to “Tricare for Life” medical coverage. Medicare Parts A and B enrollment are required. Medicare Part D is not. An additional bonus of Tricare for Life is coverage of international health care services. Additional information can be found on www.tricare.mil/tfl.
Other coverage abroad.
Other than Tricare for Life, with rare exception, people cannot use Medicare Parts A and B outside of the U.S., so I urge folks to evaluate other types of health coverage while living abroad.
If your clients plan to move back to the U.S. one day or will travel back frequently, they need to think carefully about what parts of and when to enroll in Medicare. People can contact the Social Security Administration and Medicare to discuss their options. For those already living abroad, they can consult the Federal Benefits Unit of the U.S. Embassy or consulate where they live for personalized advice. The staff in those units have direct access to Social Security files, Medicare eligibility information and can process enrollment forms. In certain circumstance beneficiaries are able to enroll in the various Medicare parts online as well.
Be sure to suggest to your clients that they include Medicare in their research and thinking about living abroad. That way they will enjoy the international lifestyle and have coverage that works for them when and where they need it.