US Medicare was built as a domestic program. With a handful of narrow exceptions, it pays only for care delivered inside the United States. A retiree who moves abroad still holds Medicare entitlements — but the program rarely writes checks for treatment in Lisbon, San Miguel de Allende, or anywhere else outside US territory. The useful question is not whether Medicare 'works' abroad; in any meaningful sense, it does not. It is whether to keep paying premiums for coverage that only activates on visits home, and how that decision interacts with private international insurance, late-enrollment penalties, and the tax treatment of foreign income.
This piece walks through the mechanics of Part A, Part B, and Part D for US citizens living outside the country as of 2026, why most retirees abroad keep Part A but drop Part B, when that math flips, and how choices about Medicare touch the Affordable Care Act premium tax credit and the Foreign Earned Income Exclusion. Rules and figures change annually; anyone facing a real enrollment decision should verify current thresholds with the Social Security Administration and a cross-border tax adviser before acting.
What Medicare covers outside the United States
Almost nothing. Original Medicare — Part A (hospital) and Part B (medical) — pays for services furnished by providers within the fifty states, DC, and US territories. The exceptions are narrow and well-known within the program:
- Emergency care in a Canadian or Mexican hospital when the beneficiary is traveling between two US points and a US hospital is not the closest option.
- Emergency inpatient care in a Canadian hospital during travel through Canada by the most direct route between Alaska and another US state.
- Non-emergency inpatient care in a foreign hospital when that hospital is closer to the beneficiary's US residence than the nearest US facility (mostly a border-town scenario).
- Certain shipboard services within six hours of a US port.
Some Medicare Advantage (Part C) plans offer limited worldwide emergency coverage, but the ceilings are typically low and the plan itself usually requires an address in a service area. Medigap policies C, D, F, G, M, and N cover 80% of foreign emergency care above a deductible, up to a $50,000 lifetime cap — again, emergencies only, and only in the first 60 days of a trip. None of these features amount to a substitute for real coverage in the country of residence.
Part A: keep it
Part A hospital insurance is premium-free for beneficiaries (or spouses) with at least 40 quarters of Medicare-covered US employment — roughly ten years of work paying FICA. For that population there is no ongoing cost to holding Part A once enrollment happens automatically at age 65, or on request if the beneficiary delayed Social Security. Dropping premium-free Part A also forfeits future Social Security benefits and typically requires repaying benefits already received, so the practical answer is: almost no one gives up Part A voluntarily.
For expats who lack the 40 quarters, Part A carries a monthly premium — reported by CMS at around $505 for beneficiaries with fewer than 30 quarters and $278 for those with 30–39 quarters in recent years, subject to annual adjustment. That premium is real money for coverage that pays only if the beneficiary returns to the US to be hospitalized. Whether it is worth carrying is a case-by-case decision and often turns on how frequently the person expects to visit home and whether they can pass the underwriting or wait periods required to buy it later.
Part B: the actual decision
Part B carries a monthly premium — around $185 in 2025 for beneficiaries below the IRMAA thresholds, higher for individuals with modified adjusted gross income above roughly $103,000 or couples above roughly $206,000. Higher-income retirees pay income-related surcharges (IRMAA) on top of the base premium, on a sliding scale that can more than triple the monthly cost. 2026 figures track inflation adjustments announced late in the prior year; the direction of travel has been upward, and current numbers should be verified with SSA before any drop decision.
An expat who has committed to living abroad and to using local or international insurance for routine care faces a straightforward question: does it make sense to send $185+ per month to Washington for coverage that only pays out during US visits? For a healthy retiree in Portugal who returns for a month each year, the honest answer is usually no.
The complication is the late-enrollment penalty. Anyone who drops Part B — or declines it at 65 — and then re-enrolls later faces a 10% increase in the monthly premium for each full twelve-month period they went without coverage. The surcharge is permanent for the life of the enrollment. Someone who drops Part B at 65 and re-enrolls at 75 will pay a 100% surcharge for the rest of their life. That penalty is what makes the drop-Part-B decision consequential rather than routine.
There is one important escape valve. Time spent living abroad after age 65 with foreign or international health coverage generally does not count as a coverage gap if the beneficiary qualifies for a Special Enrollment Period (SEP) when they return to the US and lose that coverage. However, the SEP that expressly protects people covered by an employer plan does not always apply to individually-purchased foreign insurance in the same way, and the SSA assessment is fact-specific. The safest route is to consult SSA directly before dropping Part B and to keep documentation of continuous private coverage for every year abroad.
The common pattern for US retirees who intend to stay abroad indefinitely is: keep premium-free Part A, drop Part B, buy international private medical insurance or use the local public system (often required by the residence visa's proof-of-cover rule), and accept that a later return to the US to live could carry a penalty on any restarted Part B. For retirees who plan to spend meaningful time in the US each year — say, six months in Florida and six months in Mexico — the calculation typically flips and keeping Part B wins.
Part D and Medigap
Part D (prescription drugs) carries its own late-enrollment penalty: 1% of the national base beneficiary premium (about $36.78 in 2025, revised annually) multiplied by the number of full months without creditable coverage, added permanently to premiums after re-enrollment. The absolute numbers are smaller than Part B's, but the penalty compounds over long absences. A ten-year gap yields roughly a 120% surcharge on the base premium — real money over a retirement.
Creditable coverage from a foreign or international policy sometimes qualifies to prevent the penalty from accruing, but the assessment is done at re-enrollment and requires documentation. Beneficiaries who might return to the US should keep certificates of coverage from every year abroad.
Medigap policies bought before moving abroad generally continue to pay claims that Medicare processes, but the value of paying a Medigap premium while living outside the US is limited to the narrow foreign-emergency benefit and to future US visits. Many expats let Medigap lapse alongside Part B and price a Medicare Advantage plan or a new Medigap policy at the point of return — subject to underwriting, which can be a significant risk factor for older re-enrollees with pre-existing conditions.
Private international insurance as the actual coverage
Because Medicare does not fund care abroad in any practical sense, the retiree's real health cover is one of three things: the residence country's public system, private local insurance, or a global private medical insurance policy. All three sit alongside — not instead of — the Medicare enrollment decision.
Portugal's Serviço Nacional de Saúde is accessible to legal residents, including US retirees on the D7 (passive income) or D8 (digital nomad) visas, after registration with the local health centre. It is inexpensive and, in many regions, competent. Private supplements are widely used by expats for shorter waits and English-speaking specialists. Mexico offers IMSS (public) enrollment for legal residents at modest annual premiums, though enrollment is age-restricted and excludes major pre-existing conditions; the well-known Seguro Popular successor programme has changed several times in recent years. Both countries also have deep private hospital networks where out-of-pocket costs remain a fraction of US prices.
Global expat insurers underwrite worldwide plans that typically exclude the United States, or offer US cover at a substantially higher premium. Those plans tend to be the right fit for retirees who split time across multiple countries or who want private hospital access without depending on either the local public system or their US Medicare entitlement. Anyone weighing this should treat the Medicare drop as one line in the overall coverage architecture, not as the whole picture.
The tax side: FEIE, MAGI, and the premium tax credit
US citizens remain subject to citizenship-based taxation regardless of residence. The United States taxes worldwide income; the Foreign Earned Income Exclusion allows up to $132,900 of foreign earned income to be excluded from federal tax in 2026, and the Foreign Tax Credit prevents most double taxation on income above that threshold. Neither the FEIE nor the FTC changes the beneficiary's exposure to Medicare premiums, IRMAA surcharges, or the taxation of Social Security benefits — those calculations run on modified adjusted gross income (MAGI), and MAGI for IRMAA purposes adds back the foreign earned income exclusion.
The practical implication: a US retiree in Portugal drawing $150,000 of foreign self-employment income and excluding most of it via FEIE for regular federal income tax still counts that income in the IRMAA calculation. If the retiree elects to keep Part B, they will pay Part B (and any Part D) premiums at a higher IRMAA tier than the excluded income suggests. Anyone with mixed foreign-earned and US-source income should model this carefully; the FEIE vs Foreign Tax Credit analysis covers the wider trade-offs.
The Affordable Care Act premium tax credit is a separate but adjacent question. Enrollment in Medicare Part A generally makes the beneficiary ineligible for the ACA premium tax credit on a marketplace plan — meaning a Medicare-entitled expat who returns to the US and wants ACA coverage for a spouse under 65 will need to price the family plan without their own subsidy line. This matters mostly at the margin: for spouses of Medicare beneficiaries who need coverage for a few years before turning 65 themselves.
Country-specific angles
Portugal (D7 and D8 retirees)
Portugal's residence-permit rules require proof of health insurance at the visa application stage; local private policies are inexpensive by US standards. After 183 days of residence — the standard threshold for Portuguese tax residency — the retiree can access the SNS. The IFICI regime that replaced NHR is narrowly targeted at scientific and innovation activities; most retirees will not qualify, and their US Social Security and pension income will fall under Portugal's standard progressive schedule up to 48%, with treaty relief for some pension categories. None of that affects Medicare mechanics directly, but the interaction of Portuguese tax on pension income with US Medicare IRMAA thresholds is worth modelling before the move.
Mexico
Mexico's proximity is the key difference. A retiree in Puerto Vallarta can drive or fly to a US hospital in hours, which changes the utility of retained Part B. IMSS enrollment for legal residents is inexpensive but comes with pre-existing condition exclusions; many US retirees blend IMSS for major coverage, private Mexican hospitals for routine care, and retained Medicare for planned procedures back in the US. The Mexican tax framework taxes residents on worldwide income at progressive rates up to 35% as of 2026, with US–Mexico treaty relief on pensions and Social Security. The detailed Mexico tax overview covers the wider picture; see also the totalization agreements guide for the interaction with US Social Security.
Common mistakes
- Dropping Part A. Very rarely correct if premium-free. It costs nothing to hold and provides hospital coverage during any US visit.
- Assuming Medicare will pay abroad. It will not, except in the narrow foreign-hospital scenarios above.
- Ignoring IRMAA on FEIE-excluded income. Modified adjusted gross income adds foreign earned income back for IRMAA purposes.
- Missing the Special Enrollment Period window. Returning to the US triggers timing rules for re-enrolling in Part B without penalty. Documentation of continuous foreign coverage matters.
- Confusing tax residency with eligibility for local health systems. These are separate regimes with different thresholds and paperwork.
- Assuming a Medicare Advantage plan travels. Most plans require a US service-area address, and worldwide emergency benefits are narrow.
Where to go next
For the tax-residency dimension of moving abroad, start with the tax-residency guide and the country pages for the United States, Portugal, and Mexico. On the insurance-and-visa side, the Portugal D7/D8 insurance guide and the health insurance and tax residency piece address the operational choices. For US citizens weighing the broader move, the 2026 guide for US citizens moving abroad covers filing obligations that intersect with Medicare decisions. Nothing on TaxAtlas is tax or legal advice; use a cross-border tax adviser and consult Social Security directly on enrollment mechanics.