It’s a growing trend, statistics say: more and more Americans are finding their dream retirement by moving abroad. They are drawn by lower living costs, beautiful scenery, a more leisurely pace, and the cultural appeal of living in a foreign city or town. (We have a companion article on retiring overseas on the Blog this week.)
But if you’re about to retire and looking outside of the U.S. for your future home, you need to ask the right questions about medical coverage. You’re almost certain to find that the Medicare plan you’ve relied on here will be of little use once you relocate abroad. At the same time, if you drop Part B and then later return to the U.S., you’ll face delays and penalties when trying to resume coverage.
Medicare Doesn’t Travel Well for Retirees Living Abroad
Some years back, we read this insightful article on the website of KFF Health News about an important topic. “Dream of Retiring Abroad?” read the headline. “The Reality: Medicare Doesn’t Travel Well.” The article relates stories of several Americans living as retirees in other countries and explains a few strategies you may want to consider to ensure that you’ll be covered, especially in times of medical emergency.
“As the number of American retirees living overseas grows, more of them are confronting choices…about medical care,” KFF explains. “If they were living in the United States, Medicare would generally be their coverage option. But Medicare doesn’t pay for care outside the country, except in limited circumstances.”
Because the article goes back several years, we checked to make sure it was still current. With the help of the Gemini AI tool, we discovered that the rules governing Medicare coverage overseas have not appreciably changed. (We’ve updated relevant statistics where needed.) We’ve reprinted Gemini’s conclusions at the end of this article.
A Broken Leg Leads to a Major Medical Decision
The KFF story tells the story of one 67-year-old woman enjoying retirement in a small town in Mexico. She had to make a major care decision when she broke her leg in multiple places: should she be airlifted back to Ohio for surgery and rehabilitation, or use local services?
She decided to stay in Mexico. Her surgery in a hospital in nearby Guadalajara was covered by an insurance policy through Allianz for which she pays about $300 per month. (She also pays for an additional policy that would have covered medical evacuation to the States, which costs about $600 annually.) In addition, she pays for Medicare Part B, which she can use when she visits family in the United States.
Her private plan covered the surgery costs – about $20,000 – and she had out of pocket expenses of about $2,400. At the time of the article, she was still working on getting reimbursed for visiting nurses, physical therapy, and medications. “She estimates she has spent $10,000 and has been reimbursed for about two-thirds of that so far,” says KFF, but overall, she is pleased.
700,000-plus Americans are Currently Retired Abroad
The exact number of American retirees living abroad fluctuates depending on how you measure, but according to data from the Social Security Administration (SSA), roughly 712,000 up to 760,000 beneficiaries are currently drawing their retirement checks from outside the United States.
The list of top destinations varies widely. One source cited the likeliest retirement destinations as Canada, Japan, the United Kingdom, Mexico, and Germany. But lists of Best Countries for Retirees typically emphasize sunshine and sea breezes. One of the most current lists, International Living’s Annual Global Retirement Index, singles out Greece, Panama, Costa Rica, Portugal – plus perennial favorite, Mexico.
Different Countries, but One Common Theme: Complex Health Care
Practically every American retiree has to navigate some complicated waters when it comes to health care, the article notes.
“Expatriate retirees might find private insurance policies and national health plans in other countries,” says KFF Health News. “But these may not provide the high-quality, comprehensive care at an affordable price that retirees expect through Medicare. Faced with imperfect choices, some retirees cobble together different types of insurance, a mix that includes Medicare.”
Unfortunately, while commercial health care policies may provide decent coverage, there’s little recourse when coverage is denied and often no coverage for preexisting conditions. People can also be charged higher rates for medical reasons. Some policies also come with upper age limits, with coverage that expires when a pre-set threshold is reached.
Premiums Can be Sky-High for Overseas Coverage
Then there are the premiums. The KFF Health News report cited one policy that charges a 70-year-old policy-holder $1,900 per month with a $1,000 deductible. “A plan with a $5,000 deductible might run $1,400 monthly,” says the article. And by the way, “That doesn’t include coverage for services in the United States.”
(Remember that these rates are some years old, so much has changed in the intervening years. This article from Expat Network might provide helpful insight.)
Rates can also vary by several hundred dollars per month depending on the country you’re living in. One example shows that a policy holder retired in Costa Rica pays $250 per month more than the same person with the same coverage living in France. Add another few hundred dollars if you want your coverage to be effective during visits home to the U.S.
Fortunately, KFF notes, routine care is generally good and widely available in many foreign locales, so retirees often look for catastrophic coverage and opt to pay out of pocket for minor services. (“Rules on whether noncitizens can enroll in a national health plan vary by country,” the article states.)
Skipping Medicare Part B Risks a Lifetime of Higher Premiums
The KFF Health News article hints at one more issue retirees must consider, but we think this concern deserves more attention. You may be tempted when retiring overseas to skip enrolling in Medicare entirely, but unless you’re absolutely certain you’ll never again live here in America, this can be a very expensive choice.
In most cases, if you don’t sign up for Part B when you’re first eligible, you’ll have to pay a late enrollment penalty, Medicare warns. You’ll have to pay this penalty for as long as you have Part B. For every 12-month period that you delay enrolling after your eligibility begins, unless you’re exempt for limited reasons, your monthly Part B premium goes up by 10 percent. That penalty never goes away.
If You Return to the U.S., Coverage Can Be Delayed
There’s another problem to consider if you skip Part B and later move home. Depending on when you move back, you may also experience a long gap in Medicare coverage.
As a late enrollee, warns KFF Health News, “you may have to wait until the General Enrollment Period (from January 1 to March 31) to enroll in Part B.” Under the old rules, coverage would have started on July 1st of the year in which you enroll. However, since 2023, the rules have changed: coverage now begins on the first of the month after you enroll.
Still, waiting for General Enrollment could mean a coverage delay of many months on top of higher premiums – so think long and hard before ignoring Medicare enrollment.
Foreign Retirees and Medicare: Not Much Has Changed Since 2000
As we noted at the outset of this article, the original KFF story (also published in the New York Times) goes back several years. We posed the question through Google Gemini’s AI “search bot” – in the past five years, what major changes has Uncle Sam enacted in the rules governing Medicare for retirees living abroad?
Turns out, the answer is: very little of substance has changed. As Gemini told us, “The U.S. government has not passed any new laws or updated Social Security regulations to make it easier or cheaper for permanent expats to manage Medicare since 2019.”
Expats Are Not Permitted to “Suspend” Part B Coverage
Gemini cited one specific example of the mistaken assumptions that trip up some retirees living abroad. They hold onto the mistaken belief that the U.S. government permits a “Medicare freeze” that suspends premiums while living in a foreign country.
Gemini told us, “Many retirees still assume that if they show proof of legal residency and local health insurance in a foreign country (like Spain or Panama), Medicare will let them ‘freeze’ their Part B coverage and resume it without penalty if they return.”
But this practice is not allowed, nor was it permitted when the original KFF article first appeared. There is generally no suspension of premiums. Says Gemini, “The only way to delay or stop Part B premiums without penalty is if you (or your spouse) are actively employed abroad and covered by a large group health plan through that current employer. Retiree coverage does not count.”
No Special Enrollment Period for Expats Returning Home
A related assumption held by many expats, according to Gemini, is that they will enjoy a Special Enrollment Period as soon as they return to the States, allowing a speedy restoration of Part B coverage. This is false.
“The only way a retiree overseas can get a Special Enrollment Period to sign up for Part B without a penalty,” according to Gemini, “is if they (or their spouse) are actively working and covered by an employer group health plan sponsored by that foreign employer. Volunteer work or national health care do not count.”
The vast majority of overseas retirees moving back to the U.S. will have to face what Gemini calls “the same rigid timeline” as before. “You cannot just sign up the day you land,” Gemini explains. “You are forced to wait for the General Enrollment Period (January 1st to March 31st), and your coverage will not start until the following month.”
(Note that this is an improvement over the old rules cited in the KFF article. As noted above, those re-enrolling after living abroad used to have to wait until July 1st for coverage to take effect. Now it kicks in on the first of the month following enrollment.)
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