When to Enroll in Medicare if You Live Outside the United States - dummies

When to Enroll in Medicare if You Live Outside the United States

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Foreign residency can be a tricky situation when it comes to enrolling in Medicare. You can’t use any Medicare services outside the United States, yet in most situations you’re faced with a deeply unfair Catch-22. When you’re coming up for your 65th birthday and live abroad without working, you can do either of the following:

  • Sign up for Part B during your initial enrollment period and pay monthly premiums for services that you can’t use.

  • Face late penalties if you return to the United States and sign up for Medicare at some stage in the future.

Some choice! This rule — which dates from 1966 — doesn’t make any kind of sense in the modern, mobile world. Many older Americans now live abroad, often to be near their kids and grandkids, to have a late fling with new adventures, or just to enjoy a bit of the dolce vita in exotic lands. But you’re likely to be stuck with this dilemma if you live abroad and you’re not working.

However, there are three important exceptions to this general rule, when you can delay enrollment without penalty until your return to the United States: if you’re actively working overseas and meet certain conditions, if you don’t qualify for Part A benefits without paying premiums for them, and if you need to sign up for Part D prescription drug coverage when you return to the States.

When working overseas

Until quite recently, the preceding rule applied even to most people who worked abroad beyond age 65. Exceptions were made only for some volunteers serving overseas and for workers whose foreign employers provided them with American-style group health insurance — a type of coverage that barely exists outside the United States.

But in 2012, Medicare quietly changed the rules to allow special Part B enrollment periods for people who had worked abroad but received medical care from their host country’s publicly available national health system.

Therefore, Medicare officials say you can now delay Part B at age 65 or over without penalty while abroad and get a special enrollment period when you stop working or return to the United States (whichever comes first) in the following circumstances:

  • You work for an employer (U.S. or foreign) that provides you with private group health insurance.

  • You work for an employer without special health benefits, but you’re covered under the national health system of the country where you live.

  • You’re self-employed and covered under the national health system of the country where you live.

  • You’re the spouse of anybody in the three preceding categories and have the same coverage.

  • You’re volunteering abroad and have health coverage from an approved sponsoring organization (for example, the Peace Corps).

This special enrollment comes with rules similar to the regular SEP. Like that rule, it lasts for up to eight months after employment ends. So if you stop working but don’t return to the United States within that time frame, you still confront the dilemma that nonworking people abroad face — either sign up for Part B and pay premiums or face late penalties on your return to the States.

And note that if you fail to enroll in Part B during the eight-month SEP, any late penalties are based on the date you finished work, not the end of the SEP.

For example, Frank worked for a French company in Paris for five years and retired at age 68. He and his wife, Pamela, enjoyed life there so much that they decided to stay on for a couple of years, returning to the United States when he was 70 and she was 69. Throughout their time in Paris they received medical care from the French national health system.

When they returned home and enrolled in Part B, the three years when Frank worked after 65 were exempt from late penalties. But they were assessed penalties based on the two years that had elapsed since his retirement — penalties they could’ve avoided entirely if they’d signed up for Part B within eight months of him retiring.

When you eventually enroll in Part B, you need to satisfy Social Security officials that you were indeed working abroad and covered by health insurance provided by your employer, your volunteer sponsoring organization, or the national health system of your host country.

This requirement means producing documents such as employer contracts, tax records, and maybe health records showing that a third party contributed to your medical bills. If you were working for an employer but covered by a national health system, getting a letter from the employer explaining this situation is helpful.

Because the regulation about national health coverage from a foreign country is so new, be prepared for the fact that some Social Security officials may not have heard of it. Tell them that the rule is included in section HI 00805.266 of the POMS manual.

According to Medicare officials, you can ask Social Security to apply this rule retroactively, even if you worked abroad before it came into effect and even if you already have late penalties.

Sign up for Part D drug coverage

For people who live abroad, the rules for Part D enrollment are utterly different from those for Part B. You don’t need to enroll while living overseas because, officials say, you can’t use Part D services outside the United States. (Hello? Isn’t that the case with Part B services as well? Oh, well . . . .)

Instead, you can wait until you return to the United States. You’ll then get a special enrollment period of two months, starting with the date of your return, to sign up with a Part D drug plan without incurring late penalties.