Medicare Abroad & Calculating Penalties

Over 600,000 Americans are eligible for Medicare living abroad
Through international direct deposit agreements, the U.S. is able to send social security payments electronically to U.S. citizens and U.S. residents living in more than 90 countries
If you’re a U.S. citizen living abroad, you don’t qualify for premium-free part A, but you can enroll during certain enrollment periods to have Medicare. If you plan on moving back to the U.S., it is important to enroll during your IEP (Initial Enrollment Period) to avoid a late enrollment penalty.

Generally, Medicare doesn’t cover services received outside the U.S.
- The term outside the U.S. means anywhere other than the 50 states of the United States, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands

If you worked long enough in the U.S. to qualify for social security benefits, and want to enroll in part A during your IEP tied to your 65th birthday and are currently living abroad, you must contact the American Embassy or the Consulate in the country In which you are residing.
In most cases, if you choose to buy part A, you must also have part B and pay monthly premiums for both

If you didn’t work in the U.S. long enough to earn 40 quarters of paying Medicare taxes, you’ll have to pay a monthly premium for Medicare part A.

You can get premium-free part A at 65 if:
- You already get retirement benefits from social security or the railroad retirement board
- You’re eligible to get social security or railroad retirement benefits but haven’t filed for them yet
- You or your spouse had Medicare-covered government employment.
  - You can get premium-free part A before 65 if:
    - You’ve had social security or railroad retirement board disability benefits for 24 months
    - You have end stage renal disease (ESRD) and meet certain requirements
    - If you paid Medicare taxes for 30-39 quarters, you pay a $240 premium each month
    - If you paid Medicare taxes for less than 30 quarters, you pay the full premium of $437 each month

If you must pay for part A, and you miss your Medicare IEP, you’ll have to pay a part A late enrollment penalty. Your monthly part A premium may go up 10%. You have to pay the penalty for twice the number of years you could’ve had part A, but didn’t sign up. The amount can change depending on what you pay for part A which can change each year.
- Example: If you were eligible for part A for 2 years, but didn’t sign up, you would have to pay the penalty for 4 years.
- 2 (2 years without part A) x 2 (twice the number of years you could’ve had part A but didn’t) = 4

In general, everyone pays the Medicare part B premium.
If you have free-premium part A and move abroad, but plan on coming back to the U.S. to reside, you should keep it since there is no cost
However, since you pay a premium for part B and a Medigap policy, you must consider your options.
- If you drop part B and later decide to re-enroll, you will have a lifetime part B late enrollment penalty
- You may also have to wait until the GEP to enroll in part B again. This could possibly cause a gap in coverage, as the part B wouldn’t start until July 1.
- You might not be able to buy another Medigap policy unless a company agrees to sell you one
- The cost for a new Medigap policy would likely be higher than what you currently pay. Also, the company could exclude or delay coverage for pre-existing conditions.
- If you do decide to terminate your part B, you must speak with a Social Security agent

If you don’t enroll during your IEP, you may have to pay a lifetime late enrollment penalty for part B. You’ll also have to pay a part A late enrollment penalty of 10% for twice the number of years you could’ve had part A, but didn’t sign up.

Examples

Mary is looking for information about Medicare. She has premium-free part A, but she also wants part B and part D benefits when she moves back to the U.S. to live permanently. When can she enroll?

Mary can only enroll in Medicare during certain enrollment periods. Since she missed her Medicare IEP (the 7 month period that began 3 months before the month she turned 65, included the month she turned 65, and ended 3 months after the month she turned 65), she’ll have to wait until the Medicare GEP (General enrollment period) January 1-March 31, to enroll in part B and part D. Late enrollment penalties will apply. Her coverage will start on July 1 of that year.

What is the late penalty for her for part B?

Mary’s penalty is 10% for each full 12-monoth period that she could’ve been enrolled. The amount Mary will have to pay for part B can change each year because her premium is based on her income from 2 years prior, and the penalty amount is based on the current year’s standard premium.

Since she had coverage through Portugal’s National Health Service, will she still have to pay a part B late enrollment penalty?

Since Mary’s prior coverage wasn’t from current active employment, she won’t qualify for an SEP and will have a part B late enrollment penalty. That’s because she went for more than 12 months without part B when she could’ve had it.

Mary would like to calculate her part B late enrollment penalty. She thinks she’ll return to the U.S. in August, the month she’ll turn 71.

Since she didn’t sign up during her IEP, she must first determine how many 12-month periods Mary could’ve been enrolled in part B. She can enroll in part B the following year during her GEP (General Enrollment Period) January 1-March 31, and the coverage will start on July 1. All 3 months of the GEP count toward her penalty. Her IEP would have ended in November, 3 months after the 65th birthday in August so begin counting months starting December of the 65th birth year to March 31 of her GEP at age 71.
She went 6 years and 4 months without part B coverage which equals 6 full 12-month periods.
She will receive 10% penalty times 6 months which equals 60%. (10% x 6 = 60%)
$135.50 (standard part B premium) x .60 (60%) = $81.30 (Mary’s penalty)
$81.30 (Mary’s penalty) + $135.50 (Part B premium) = $216.80 (Mary’s monthly part B payment)
The $135.50 part B premium amount is based on Mary’s income from 2 years ago. If your income from 2 years ago was equal to or less than 85,000 the standard premium applies. This amount can change each year.
People with higher incomes may pay an income related monthly adjustment amount (IRMAA)

Mary also has questions about Medicare prescription drug coverage, also called part D. Will she have to pay a late enrollment penalty for Medicare part D?

In general, Mary will be eligible to enroll in a part D plan when she enrolls in Medicare part A or part B or both, and lives in the service areas of a part D plan. Since Mary was out of the country when she was first eligible to enroll in part D, her part D IEP includes the 3 months before she became eligible for part D (when she lives abroad), the month of eligibility (when she returns to the U.S.), and the 3 months following (after she returns to the U.S.).
If she returns to reside in the U.S. in June, her IEP for part D will last from March through September, but she can’t enroll in part D until June, when she returns to the U.S. and establishes residency in the coverage area.

What if she doesn’t sign up during her part D IEP, will she have another chance to enroll?

If Mary misses her part D IEP, she’ll have to wait until the next Medicare OEP, which is October 15- December 7 each year. Mary’s prescription drug plan coverage will begin January 1, and she’ll have a lifetime part D late enrollment penalty based on the number of months between the end of her part D IEP (3 months after the month she returns to the U.S.) and when she starts getting part D coverage.

Mary wants to know how to calculate her Medicare prescription drug coverage (Part D) late enrollment penalty.

To calculate the part D late enrollment penalty, determine how many months she went without creditable prescription drug coverage. The penalty is 1% for each full uncovered month.
1% x (number of months with no coverage) x $33.19 (2019 national base beneficiary premium)
To be creditable prescription drug coverage it must be greater than or equal to the Medicare drug coverage
Here’s the math if she went without creditable coverage for 12 months. .12 (12% penalty) x $33.19 (2019 base beneficiary premium) = $3.98 (rounded to the nearest $.10 to $4) amount added to your plan’s monthly premium
$4 + (monthly premium) = amount you pay
The national base rate penalty may change each year so your penalty amount may also change each year.
In most cases, you’ll have a penalty for as long as you gave Medicare part D coverage.