Medicare MSA Accounts for Expats
One of the most overlooked and misunderstood items for expats concerned with health insurance is their Medicare strategy back in the good old USA, as they age past 65. If you’ve worked in the system and paid your dues so to speak, then at 65 you are entitled to participate in Medicare benefits. This article is not meant to be a total presentation on Medicare, but instead to point out a few things for expats to consider.
Most people we talk to of Medicare age are paying for their part B, which covers many things besides the hospital bills. Some people are paying it and don’t know they are paying it. It has been coming out of their social security checks for years. If you are turning 65 this year and already receiving your social security, then you are automatically enrolled in Part B and the month you turn 65, roughly $144. less dollars will show up in your check. If you opt out of B when you turn 65 then there is a penalty if and when you want to re-enter the system later on. That is another issue and one to be aware of.
But if that is all you have; part A (for hospital coverage), and part B, with no other supplement or plan, then many big things you have treated in the US would require you pay 20% of the bill. So, let’s say you have prostate cancer surgery, or cardiac bypass surgery, then your share of the total bill is going to be substantial. That’s why if returning to the US sometime down the road to have medical treatment is a possibility for you, then exploring some of the more obscure Medicare options may be extremely helpful.
One of the Medicare options I am working with more frequently now, with both expats and full-time RVers, is a form of the Medicare Advantage plan called an MSA, or medical savings account. It is a combination of a high deductible health plan coupled with a cash account. The deductibles on these plans are generally in the 5,000 to 8,000 dollars range. And then the plan actually deposits money into your special MSA account, which you have a debit card to use for medical expenses. Generally, the annual deposits are between 2,000 to 3,000 depending on the plan. And as long as you spend the money on a QME, or qualified medical expense, there is no tax consequence. Anything you spend money on that is covered by Medicare parts A or B becomes part of your deductible paid for the year. If and when you meet your deductible, then everything above that is covered 100%. So here is an example. Let’s say you need some dental work and the bill comes to $1,000. You can use your MSA dollars to pay for the dental work since it is on the list of QMEs, but since dental is not covered by Medicare A or B, the dollars spent on that dental work don’t go toward your deductible for the year, but at least you had dollars to use for the dental work with no tax on the money. This situation is unique to all of Medicare plans. There are a number of other pros and cons that you will need to be aware.
The other unique benefit of these MSA plans is that you can go to any doctor that accepts Medicare, you are not restricted to a network like so many other plans. And by law, there is no premium allowed on these plans. Doing the math, it generally takes about two to two and a half years to accumulate your deductible from the deposits, assuming you don’t spend any of the money. But once you have the deductible saved in your account, think of the benefits of having cash to pay for things that normally aren’t covered (without an additional plan that costs money). It is important to realize that you are responsible for the deductible, between the cash in the account and out of pocket money.
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