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Are you covered by Medicare when traveling abroad?

Does Medicare cover you when you're overseas? What happens if you're traveling on vacation and get sick? Or what if you retire abroad?

The general answer is that Medicare coverage outside the U.S is available only in very limited circumstances, such as:

  1. You're in the U.S. but have an emergency, and a foreign hospital is closer than the nearest U.S. hospital.
  2. You have an emergency while traveling in Canada between Alaska and another state, and the Canadian hospital is closer than the nearest U.S. hospital.
  3. You live in the U.S. close to a border and a foreign hospital is closer to your home than the nearest U.S. hospital, regardless of whether it's an emergency.

If you're traveling on vacation overseas, it's critical that you arrange for medical coverage during your stay. There are two ways to do this:

  • Buy travel insurance that will pay for medical services incurred during your trip, and/or provide for emergency evacuation back to the U.S. This travel insurance can be purchased online, often for a few hundred dollars per trip. In many instances it covers other travel risks, such as flight cancellation and lost luggage.
  • You can buy Medicap insurance policies that also will pay for medical emergencies incurred during foreign travel. Not all Medigap policies include this coverage, so you need to look closely to make sure overseas travel is included. Often these policies can only be purchased during open enrollment periods, so you'll need to think ahead if you're planning travel overseas. You might not be able to upgrade your policy just before leaving on your trip.

It becomes more complex if you decide to retire overseas and live permanently outside the U.S. You'll want to make arrangements for medical insurance in your host country, and it will vary substantially between countries.

"If you're overseas for an extended period, you might be tempted to cancel your Medicare until you return -- be careful," said Andy Landis, author of "Social Security: The Inside Story." "If you re-enroll after a 12-month cancellation, your enrollment will be delayed. and you'll pay a late enrollment fee for the rest of your life."

For most people, Medicare Part A, which covers hospital expenses, doesn't require a premium, so you should still be eligible for coverage if you return to the U.S. However, since Medicare doesn't cover you overseas, you might be tempted to think you'll be able to stop paying Medicare Part B premiums that cover outpatient expenses (currently $104.90 per month per person) and Part D premiums for prescription drugs (which can range from $30 to $50 per month). Or you might think that if you or your spouse or partner get really sick, you can just return to the U.S. for treatment and start paying these premiums.

Think again. It's not that simple.

The Part B premium will increase by 10 percent for each 12-month period you were eligible but didn't pay premiums. The Part D premium will increase by about 32 cents for each month that you forgo paying premiums despite being eligible. Let's look at an example to see how this could play out.

Suppose you live overseas for 10 years, during which time you decline Medicare coverage even though you're eligible. If you return to the U.S. and enroll again in Medicare, your Part B premium would increase by 100 percent during that time frame (10 percent for each year in the 10-year period), which would amount to an additional $104.90 per month in 2014.

According to Medicare's late penalty rules, your Part D premium would increase by about $38.40 per month in 2014. So the total penalty would add about $143 per month to your medical premiums on top of the customary premiums -- double that if you're married. You'd most likely also have to include premiums for Medigap coverage to supplement your Medicare coverage.

In addition, there are limited periods when you can enroll in Medicare if you cancelled Medicare coverage previously when eligible; you can only enroll during January through March, and benefits start on July 1.

The Medicare issues described above aren't necessarily deal-breakers for your overseas adventure, whether it's just a short vacation or a more permanent move. But they're definitely something to cover on your checklist.

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