Editor’s Note: Journalist Philip Moeller is here to provide the answers you need on aging and retirement. His weekly column, “Ask Phil,” aims to help older Americans and their families by answering their health care and financial questions. Phil is the author of the new book, “Get What’s Yours for Medicare,” and co-author of “Get What’s Yours: The Revised Secrets to Maxing Out Your Social Security.” Send your questions to Phil.
Medicare questions about Americans living outside the U.S. could support a separate edition of Ask Phil. Many older Americans travel extensively or live outside the U.S. for extended periods. Medicare generally does not cover health care expenses outside the country, although some Medigap and Medicare Advantage plans do cover emergency foreign medical expenses. There also are some exceptions for residents living near Canada whose best emergency care options are in that country.
The question many temporary or permanent ex-pats ask is whether they should keep their Medicare coverage. My standard answer is that it depends on the likelihood of their returning to the U.S. and on the duration of their absence. Dropping Medicare and its various premiums will save them money, of course, but these savings need to be balanced against the costs of late-enrollment penalties for Parts B and D of Medicare should the person return to the U.S. and wish to sign up for Medicare again.
If people decide to retain their Medicare, they should know that basic Medicare – including Medigap plans — will cover them right away should they return to the U.S. They do not need to establish residency in the U.S. to be covered. However, they do need a local residence to use Medicare Advantage and Part D prescription drug plans.
Basic Medicare permits enrollees to get care anywhere in the U.S. from doctors and hospitals that accept Medicare patients. Basic Medicare includes Part A for hospital coverage and Part B for doctors, outpatient expenses and durable medical equipment. Many people with basic Medicare also purchase Medigap plans, which provide supplementary coverage that plugs many of the coverage holes in basic Medicare.
Medigap plans are regulated by the states, and a person must be a resident of a particular state before being able to purchase a Medigap plan from insurers in that state. After that, however, it turns out that their Medigap plan will cover them anywhere in the U.S., and they need not have an established U.S. residence to use their policy.
The best time to buy a Medigap plan is during a person’s initial Medicare enrollment period. At that time, people have what are called guaranteed access rights to Medigap. This means that insurers must sell them a plan and can’t charge them more for coverage if they have a pre-existing health condition.
Medigap annual premiums average roughly $2,000 a year, and it may not make sense to incur this expense for coverage that can’t be used. However, expats may have limited Medigap choices if they return to the U.S. and buy a policy after the period for their guaranteed access rights has expired. And should they need emergency care in the U.S., it’s likely they won’t be able to buy a Medigap policy that takes effect quickly enough to help them pay such bills.
About a third of all Medicare enrollees have purchased Medicare Advantage plans, which are managed care plans offered by private insurers. They can combine all the features of basic Medicare and include out-of-pocket spending ceilings that, like Medigap, protect people from catastrophic medical expenses. However, Medicare Advantage plans require people to live in a local service area, and it doesn’t make sense for Americans residing outside the U.S. to buy or keep such plans.
The same limitation is true for Part D prescription drug plans, whether bundled with a Medicare Advantage plan or offered as stand-alone coverage for people with basic Medicare. These plans will not cover people who return to the U.S. without establishing residency.
The lack of a Part D prescription drug plan does not mean that someone with basic Medicare lacks coverage for all drugs. The Part A hospital component of Medicare does cover drugs administered in hospitals and other institutional care settings. Part B covers drugs administered by doctors and other licensed professionals in their offices and other outpatient settings.
The Medicare Rights Center, a non-profit provider of consumer Medicare advice, tells people to drop Medicare Advantage and Part D plans if they move outside the U.S. It cites Medicare rules that provide people who return to the U.S. with a two-month enrollment window for signing up for such plans when they return. I think people should contact prospective insurers before they return to find out about the effective date for regaining coverage.
Because the issue of U.S. residency is connected with Medicare coverage, let’s cover some of these broader issues as well.
As it turns out, most Americans don’t need to be U.S. residents to even get Medicare. The Social Security Administration oversees Medicare eligibility. It says that a U.S. citizen can qualify for Part B of Medicare if they also qualify for premium-free Part A. There is no residency requirement. What this means is that an ex-pat who qualifies for Social Security can purchase Part B of Medicare without ever coming to the U.S. and establishing residency.
It’s a different story, however, for Americans who have not qualified for premium-free Part A. Most people qualify by working at least 10 years in jobs where they paid Social Security payroll taxes. They also can qualify if a spouse or, in some situations, an ex-spouse has qualified. If these conditions are not met, then the person must pay for Part A. The premiums can be steep, exceeding $400 a month. Further, to get Part B, such a person must be a U.S. resident.
In theory, it may be possible to live outside the U.S. and retain local residency. However, the burden of proof can be high, and I think it’s a risky health insurance strategy.
Social Security publishes official criteria for what it calls “convincing evidence” of residency. Unfortunately, being in prison is its most dramatic proof — perhaps of limited value in this discussion! No single item on this list is likely to represent sufficient proof by itself, and authorities can require that multiple conditions be met:
- Property, income or other tax forms or receipts;
- Proof of U.S. home ownership or rental lease or rent payment record;
- Utility bills addressed to the claimant;
- S. driver’s license;
- Telephone directory listing;
- Regular and frequent participation in social programs such as vocational rehabilitation, Meals on Wheels or evidence showing that the claimant regularly receives services from a social agency;
- Proof of employment, such as pay stubs or a contract;
- Proof of active participation in a religious, fraternal, or social organization;
- A record of volunteer activity which shows regular and frequent performance;
- Clinic cards or doctor’s record showing dates of visits for regular medical treatment;
- Proof of a local U.S. bank account or check-cashing card at a local establishment; and
- Correspondence addressed to the claimant
Establishing faux residency in the U.S. may provide comfort to some Medicare enrollees. But I would not use it to maintain Medicare Advantage or Part D coverage and risk having an insurer reject a huge claim. And believe me, these are the kinds of claims that insurers are motivated to question.
Here are a few other questions to round out this week’s column:
Genevie – Texas: My husband will reach full retirement age at the end of April. He plans to suspend his retirement benefit until at least age 68, by which time I would have already reached my full retirement age. Because he is the higher earner, I plan to file for spousal benefit at my full retirement age. He is not clear on how soon he should suspend since the end of April is fast approaching. He also wonders if he would begin receiving delayed retirement credits the sooner he suspends? Is it a fact that he has to be receiving his Social Security before I can apply for a spousal benefit? We are somewhat perplexed as to how to make the best decision.
Phil Moeller: Unfortunately, under the Social Security rules enacted last year by Congress, it is no longer possible for a person to “file and suspend” their benefit, which used to allow a person to enable their spouse to file a spousal benefit without having to begin receiving their own retirement benefits.
For either of you to claim a spousal benefit, the other spouse must first have filed for their own retirement benefit.
Because he can’t suspend anymore, the only way for him to get maximum retirement benefits at age 70 is by not filing for retirement until then.
This suggests that you consider filing first for your benefit. Once he has reached his full retirement age, he then could file what’s called a claim for restricted benefits, which will let him claim only a spousal benefit while letting his own retirement benefit grow.
By the way, you also have the right to file a restricted application at your full retirement age, should he decide to first file for his own benefit. However, as the higher earner, I don’t recommend having him file earlier. In addition to the value of having higher benefits himself if he waits, waiting also would guarantee that you would receive a maximum survivor benefit should he die before you.
Your best decision is complicated by the gap of more than 18 months between reaching your full retirement ages. For example, you could file early for your retirement this April. This would reduce your benefits, of course, but would allow him to file for a spousal benefit as soon as he turns 66 and collect this benefit for up to four years before filing for his retirement.
His benefit would not be reduced by your early filing. The maximum spousal benefit is reached at the claimant’s full retirement age. It is based on what the earner was entitled to at their full retirement age, not what they actually received when they filed for their retirement benefit. There are many possibilities here, and your choice also may well be affected by your current need for income and you and your husband’s health outlooks.
Daniel – Massachusetts: My family has been on MassHealth for the last four years or so. We have very little income and no other source of insurance. I will be turning 65 soon. Can I stay on MassHealth, or do I have to go on Medicare?
Phil Moeller: In all likelihood, you will add Medicare and remain on MassHealth. People of Medicare age on Medicaid often become what are called “dual eligibles” and participate in both programs. There are lots of Medicare low-income support programs for enrollee expenses, including a program that helps pay for prescription drugs. If you need help figuring out the details of how to apply for Medicare and these support programs, I suggest you call the State Health Insurance Assistance Program, which offers free Medicare counseling.
Stacy – Oklahoma: I was widowed five years ago at age 55. I have never remarried. I am now eligible to collect a widow’s benefit from his Social Security in the amount of $1,678 a month. If I wait until I’m 62, my own reduced retirement benefit would be $1,426 a month. Can I start collecting on his right now and put mine off to age 70, at which time my benefit would be roughly $2,300 a month? Should I start taking my widow’s share now at age 60?
Phil Moeller: Your own retirement benefit at age 70 will be greater than the maximum widow’s benefit you would receive if you waited to claim it until it reaches its maximum amount at your full retirement age. As a result, you already know that deferring your own retirement until age 70 will produce the maximum benefit for the rest of your life.
For this reason, there is no reason to delay filing for the survivor benefit. You are eligible at age 60, and there’s no reason to wait until 62. Even though your benefit will be reduced by early filing, you will still come out ahead by claiming it now.
To take a rough example, say you filed at age 60 and got only 70 percent of what you would receive in widow’s benefits if you waited to file until your full retirement age. Between ages 60 and 70, then, you would receive reduced benefits equal to seven years of full benefits (10 years at 70 percent a year). There is no other filing date that would yield you more cumulative benefits by the time you turn 70 and file for your own retirement.