You’ve worked hard in the U.S. all your life and you’ve paid into Social Security for more than the minimum of 40 quarters (16 years) required to get Social Security payments. You’re thinking of retiring. But using a little bit of math (and a lot of projections about the rising cost of living in the U.S.) you’ve decided that you really won’t be able to afford to retire comfortably in America. So why not go abroad, where the living is a lot easier and cheaper?
Great. Except for one thing. You can get your Social Security payments, but you can’t get Medicare. Did you know that? Nope, no Medicare—so you’re going to be paying out of your own pocket for your medical care while living abroad.
Oh, yes, that there’s one more catch. You have to sign up for Medicare, even if you don’t use it, and you have to pay for it at the normal rate. And if you don’t, then if you ever want to come back to the U.S. and sign onto Medicare, you’re going to be penalized. Really? Yep—you’re going to be paying a much higher rate for every year you missed paying into the system after age 65.
All right, so it’s obvious: someone doesn’t want you to retire outside the U.S., because you can’t get Medicare coverage there, and you’re penalized because you aren’t paying into the system.
Does this make sense? Not really. If you look at the big picture, the Medicare system should be changed to encourage Americans to retire abroad. And why is that? Shouldn’t we do everything to force Americans to spend their retirement dollars here and keep their income in the American economic system? Answer: not really.
If you look at the economic system overall, people over 65 are actually a drain on the economic system. First of all, they don’t produce very much. For the most part, they are just pure consumers and don’t add anything to the production economy. They’re the same as children, except children have a future: as they become older, they begin to add to the production economy. But senior citizens don’t. In fact, as they become older, they weigh more and more heavily on the medical system. And, in case you didn’t know it, the American medical system is about the most expensive in the world. “U.S. health care spending grew 5.8 percent in 2015, reaching $3.2 trillion or $9,990 per person. As a share of the nation's Gross Domestic Product, health spending accounted for 17.8 percent.”
Here’s a few charts that show how much more pharmaceutical products, hospital care, and other medical services cost in the U.S. than in other countries. In 2013, U.S. spending “was almost 50 percent more than the next-highest spender (France, 11.6% of GDP) and almost double what was spent in the U.K. (8.8%).”
We have a shortage of doctors, Medicare is running out of money, and seniors are suffering from a lack of resources for their retirement.
Even back in 2013, experts concluded that “Policymakers considering changes to social insurance programs such as Social Security and Medicare must consider the economic realities confronting elderly Americans. Many of America’s 41 million seniors are just one bad economic shock away from significant material hardship. Most seniors live on modest retirement incomes, which often are barely adequate—and sometimes inadequate—to cover the costs of basic necessities and support a simple, yet dignified, quality of life. For these seniors, and even for those with greater means, Social Security and Medicare are the bedrock of their financial security. Any proposed changes to these programs must be evaluated not just for their impact on future budget deficits, but for their impact on living standards of the elderly.”
So why not help solve this problem by permitting a significant part of the senior population to live abroad, where the costs are lower? If seniors lived abroad and Medicare paid their medical expenses, not only would the retirees get good healthcare at a lower price, but the cost for the Medicare system would be lower, too, in that foreign doctors charge less than American doctors.
There are some other benefits, too. There is a shortage of doctors in the U.S. The U.S. will be short some 90,000 doctors by 2025. “"An increasingly older, sicker population, as well as people living longer with chronic diseases, such as cancer, is the reason for the increased demand," Darrell G. Kirch, the AAMC's president and chief executive, told reporters during a telephone news briefing. The increased demand for doctors will lead to the shortage. Yet another reason to encourage seniors to live abroad, where they can use foreign doctors and free up doctors in the U.S. system.
Presumably the reason why the Medicare rules were structured to prevent spending overseas was to ensure that Medicare recipients spent their money locally. That would make some sense if there were a shortage of patients and a surplus of doctors. But the problem today – and even more so in the future – is exactly the opposite. We have a shortage of doctors, Medicare is running out of money, and seniors are suffering from a lack of resources for their retirement. If, on the other hand, seniors were encouraged to move abroad, they would have a more affordable retirement, their healthcare costs would weigh less heavily on them and on the Medicare system, and the overall system would function better.
This should be an important ingredient in Senator Bernie Sanders’ “Medicare for All” plan. He should make Medicare accessible abroad. This would result in significant savings for the Medicare system, making the overall medical system more affordable for America and its citizens. There is little reason to reject this policy. It allows retirees to have freedom of choice, and it does little to harm our overall economy and way of life.
Michael T. Hertz