How to handle Medicare if you’re returning to the U.S. after living overseas

If you are living overseas when you reach age 65, don’t overlook Medicare.

That’s the age when you should sign up unless you meet an exception. And depending on how long you plan to remain abroad or whether you are working there, it may make sense to be on Medicare.

“It’s critical that beneficiaries living abroad know the rules on this,” said Danielle Roberts, co-founder of insurance firm Boomer Benefits.

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Otherwise, she said, you could return to the U.S. and find yourself waiting on coverage to kick in — in addition to facing late-enrollment penalties.

Basic Medicare consists of two parts. Part A, which provides hospital coverage, is free as long as you have at least a 10-year work history of paying into the system. Part B (outpatient care) has a premium. In 2021, the base amount is $148.50, although higher earners pay more.

Except in very specific situations, basic Medicare does not cover medical services you receive outside the U.S. and its territories. The exceptions include when you’re on a ship within six hours of a U.S. port or you’re in, say, Alaska, and the closest hospital to treat you is in Canada.

Nevertheless, anyone living abroad may still want to sign up for Medicare.

Eligibility for Medicare starts at age 65. You get an initial enrollment period, as it’s called, which begins three months before your 65th birthday and ends three months after it (seven months total).

The general rule is that unless you have qualifying coverage (as defined by the U.S. government), you face a late-enrollment penalty if you sign up for Part B after your initial enrollment period. That amounts to a 10% higher monthly base premium for each 12-month period you should have been enrolled but were not. And, those penalties are life-lasting.

The rule applies to people living overseas, as well. According to Medicare expert Patricia Barry, author of “Medicare for Dummies,” if the initial enrollment period is missed, these are the circumstances when you could sign up late with no penalties:

• You work for an employer (American or foreign) that provides you with private group health insurance.
• You work for an employer with no special health benefits, but are covered under the national health system of the country in which you live.
• You are self-employed and covered under the national health system of the country in which you live.
• You are the spouse of anybody in the above three categories, with the same coverage.
• You are volunteering abroad and have health coverage from an approved sponsoring organization, such as the Peace Corps.

Otherwise, you can expect to pay late-enrollment penalties if you miss your initial enrollment period.

Be aware that you’d also need to prove that you had qualifying coverage while working overseas, Barry said. In other words, hold onto things like tax returns, pay stubs, medical statements, and records of doctor visits and bills.

Additionally, different situations come with different enrollment times if you’re signing up late for Medicare.

For instance, if you get a “special enrollment period” because you had qualifying coverage and were employed, that window to sign up starts when you lose that coverage (or employment, whichever is first) and lasts eight months. In that situation, your coverage begins the month after you sign up.

However, if you don’t have a qualifying health plan and sign up late, you can only enroll during Medicare’s general enrollment period, which is Jan. 1 to March 31. Then you have to wait for coverage to be effective July 1.

Separately, if you live overseas and don’t qualify for free Part A, and you sign up for Medicare later than age 65, you get a three-month window once you move back to the U.S. to enroll. In that situation, there are no late penalties.

If you plan to travel back and forth between the U.S. and your spot abroad, it can make sense to be enrolled in Medicare if you would have no coverage otherwise, said Elizabeth Gavino, founder of Lewin & Gavino and an independent broker and general agent for Medicare plans.

“Having parts A and B gives the Medicare beneficiary [some] coverage when they do come to the U.S.,” Gavino said. 

Meanwhile, Medicare Part D is prescription drug coverage and is sold through private plans — either as a standalone policy or as part of an Advantage Plan (Part C), which delivers Parts A and B and usually includes extras like dental and vision. Like basic Medicare, you get no Part D coverage overseas.

For people living abroad who sign up for Part D upon returning to the U.S., there is no late-enrollment penalty as long as you get coverage within a certain time frame of relocating (either two or three months, depending on the specifics of your situation).

If you miss your window, you’ll face a life-lasting penalty of 1% for each month that you didn’t have coverage but should have, along with a possible delay in when coverage is effective. That penalty amount is based on Part D’s base premium, which for 2021 is about $33.