Medicare and Moving to Italy

I’m starting to feel like I’m writing only articles about problems, yet as I’ve done more in-depth research regarding moving to Italy, I continue to find situations that would definitely need to be considered. Does this steal my joy…should it steal your joy? Of course not! There is nothing that would prevent any of us from making the move; however, it’s always best to go in with eyes wide open and know what the implications are/can be.

Medicare can be really complicated – or not. If one plans to permanently move to Italy and have no intention of returning, then this is easy. No problem.  If one plans to do the Schengen Shuffle, there are some limited complicating issues. However, if one plans to move to Italy on a long-term basis yet wants to keep the possibility open to returning to the U.S. at some future date, then there is a significant dilemma.

About half of the retirees in the U.S. are on traditional Medicare. For complete coverage, this requires four components:  Part A, Part B, Part D, and a Medigap policy. Part A covers hospital charges. There is no charge for Part A. Part B covers doctor’s visits and other outpatient care, as well as limited skilled nursing facility care. Part B is purchased directly from Medicare. The base premium is currently $185 a month. The U.S. government applies a IRMAA surcharge based upon the person’s income level which can make the monthly premium as high as $628.90. Part D covers drug costs. It is administered by private companies and the monthly premium varies from $0 to over $100 a month. An IRMAA surcharge of up to $85.80 is also applied. Medigap policies cover many of the out-of-pocket costs such as co-pays, etc. These policies are offered by private companies in ten different standardized plans which vary in the type of additional coverage they offer. The plans are specified by letters, such as Plan A, Plan B, etc. Some of these more expensive plans, such as Plan G, offer  “foreign emergency travel coverage.” These policies vary significantly in prices, but the more comprehensive plans usually are over $100 a month. 

The other half of U.S. retirees are on a Medicare Advantage plan. These plans provide comprehensive coverage that is more simplified than traditional Medicare. They are usually less expensive, but they accomplish this by controlling (aka restricting) access to care. Medicare Advantage policies are offered by private insurance companies and are limited to a specific geographical area where they have established a network of providers.

If you plan to live in Italy half of the year, 90 days at a time – aka the Schengen Shuffle – then there is an issue to be aware of. 

Medicare does not provide international medical coverage. There are some Medigap plans that offer “foreign emergency travel coverage”, but the coverage is restricted to only the first 60 days of travel, has a lifetime cap of $50,000, and is only applicable to emergency situations. This lifetime cap is not adequate to cover a major serious medical event. Some Medicare Advantage plans also offer similarly limited foreign emergency travel coverage.

So, if doing the Schengen Shuffle, one must either accept this risk and be prepared to pay out of pocket – or – purchase international travel medical insurance. These policies are not inexpensive if pre-existing medical conditions are covered, and the policy limit is sufficient to cover a major serious medical event. 

This is where there is a huge dilemma, and it gets really complicated. If one want to move to Italy for a long-term stay yet wants to keep open the possibility of returning to the U.S., there is a significant issue with Medicare.

It would seem logical that one could simply stop making premium payments for coverage that was not being used while living in Italy, then simply resume Part B & Part D & Medigap coverage when and if one returned to the U.S. You could theoretically do this, but it  would result in being hit with late-enrollment penalties as well as the possibility of exclusion of pre-existing medical conditions. 

For Part B coverage, Medicare has a rule that applies a surcharge for late enrollment. This surcharge is 10% of the policy amount for every year beyond the date that Medicare coverage would have been available for that person. The surcharge is permanent for the rest of the person’s life. There is also a late-enrollment surcharge for Part D coverage that is 1% for every month that Part D coverage is started after the availability date. This surcharge applies for life. For someone that spent ten years in Italy then returned to the U.S., this “late enrollment” surcharge would double the cost of their Medicare Part B & Part D premiums!

Even worse, Medigap policies would no longer be required to offer “Guaranteed Issue Rights” if coverage lapsed. This means that the company providing the policy can ask health questions and either deny coverage or increase premiums based upon pre-existing conditions.

Therefore, those on traditional Medicare would need to keep paying approximately $7,300 a year (cost for two people) to keep their Medicare coverage intact while living in Italy, even though there were not receiving any health care benefits from this expense.

For those on a Medicare Advantage plan, there is yet another dilemma. These plans are county or state specific and require that the person must reside in the plan’s service area for at least six months of the year. If someone moved outside of the U.S. for an extended period of time, usually specified as more than six months, they would lose eligibility for the plan. This could be circumvented by switching back to traditional Medicare, but this can only be done once a year during the Medicare open enrollment window. It would also result in exposure to the risk of not having “guaranteed issue rights” for a Medigap policy.

Medicare does offer a “Special Enrollment Period” that would prevent these late-enrollment penalties for someone living abroad that returns to the U.S., but this requires that the person have proof over “creditable coverage” from a U.S based employer while living abroad. Unfortunately, Italy’s national health insurance (SSN – Servizio Sanitario Nazionale) does not qualify as creditable coverage. 

Moving to Italy and U.S. Medicare is not a huge issue for those on the Schengen Shuffle plan. There is no issue for those that plan to move to Italy permanently and have no intention of returning to the U.S. However, there is a significant dilemma for those that want to keep open the possibility of returning to U.S. at some future date. It is important to be aware of this for planning and avoid a surprise down the road.