Dear fellow practitioners, CPAs, attorneys, and other professionals. Welcome to the twelfth edition of our “Dreidel” newsletter about planning and investment issues of US citizens living overseas.
This month, Mike Reed talks about how to help your US expat clients make Medicare decisions.
It is that time of year again, when Americans aged 65 or older are making their decision on Medicare. People turning 65 will need to decide which Medicare plan to choose for the first time. Those who have been on Medicare will want to see if there are any changes they would like to make to their current plan. The open enrollment period runs through December 7th.
The options in Medicare can be broken down as follows:
- Sticking with traditional Medicare Part A, which covers hospital stays and is “free”to people who have worked at least 10 years.
- Part B – which covers doctors’ visits. The premium can be $174.70 to over $559 a month, depending on income.
- Adding a Medigap Plan to pay for hospital and doctors’ costs which are not covered under Parts A and B. This runs, on average, $164.
- Part D drug plan, which is an average of $37 a month.
The other path is a Medicare Advantage Plan that is offered by a private insurance company. Medicare Advantage takes Parts A and B and packages them with services the Insurance company chooses to offer. Most of the commercials you see on TV are for Medicare Advantage Plans. The cost and coverage options for these plans can vary greatly as there are many to choose from.
Both paths – Traditional Medicare and Medicare Advantage – offer their advantages and disadvantages.
We often get asked by our US expat clients what they should do about Medicare. Like most things in life, it depends.
Scenario A: someone who has moved overseas, has good local medical insurance, and does not plan on being back in the US very often, except for brief visits. In this case, dropping Medicare could make sense. Paying premiums for services you may never use could be a wasted cost. Often if you are traveling overseas, you can buy a short-term travel insurance policy.
Scenario B: This is more complicated and involves persons who think they may be back in the US quite frequently, for a few months a year, or may consider moving back to the US in the near-to-medium term. This could apply, for example, to someone who travels back to the US often to take care of an aging parent or in some cases, adult children. This is not an uncommon scenario.
In this case, keeping Medicare and paying the premiums can make sense so that you are not hit with the premium penalty (which is 10% for every 12 months you were not enrolled after turning 65.) This penalty compounds, so if someone were to enroll in Part B three years after they turned 65, they would pay an extra 30% every month for their Part B premium.
Scenario C: Another reason to keep US Medicare Part B is for treatment options that may only be available in the US. While many countries offer excellent healthcare, some options may only be available in certain countries, and the US can have many of those options.
In summary, Medicare planning for US expats may add a few extra layers of complexity. Consulting with an expert can help shed light on some of the more complicated decisions.
We are happy to discuss this in further detail. Please contact us to discuss.
Disclaimer Nardis Advisors LLC (“Nardis”) is a Registered Investment Advisory Firm regulated by the U.S Securities and Exchange Commission in accordance and compliance with applicable securities laws and regulations. Registration does not imply a certain level of skill or training. Nardis does not render or offer to render personalized investment advice through this medium. The information provided herein is for informational purposes only and does not constitute financial, investment or legal advice. Investment advice can only be rendered after delivery of the Firm’s disclosure statement (Form ADV Part 2) and execution of an investment advisory agreement between the client and Nardis.