Medicare is often called "free at 65," but that's only part of the story. While you might not pay federal income taxes on Medicare benefits, there are real costs: premiums to pay, deductibles to meet, copays, and coinsurance. Understanding these costs is essential for budgeting and choosing the right plan in Minnesota.
This guide breaks down every cost you need to know about so you can plan ahead and find ways to reduce what you pay.
Part A Costs (Hospital Insurance)
Most people don't pay a monthly premium for Part A if they or their spouse worked for at least 10 years and paid Medicare taxes. If you don't qualify for free Part A, you may pay a monthly premium.
What You Pay with Part A
Usually $0
If you or your spouse have 10 years of Medicare tax history, your Part A premium is free. Otherwise, you may pay a monthly premium.
Deductible Applies Per Hospital Stay
You pay a deductible for each benefit period (hospital stay). For current amounts, check Medicare.gov, as these change annually.
Coinsurance Applies After Day 20
If you need inpatient skilled nursing care after a hospital stay, you don't pay anything for the first 20 days. After day 20, you pay coinsurance per day for the next 80 days.
Check Medicare.gov for the current year's specific deductible and coinsurance amounts, as these are adjusted annually.
Part B Costs (Medical Insurance)
Part B covers doctor visits, outpatient care, preventive services, and medical equipment. Nearly everyone pays a monthly premium for Part B, and the amount varies based on income.
Part B Premium (Income-Based)
Most people pay a standard monthly Part B premium. However, if your income is higher, you pay more through Income-Related Monthly Adjustment Amounts (IRMAA). The thresholds are based on your modified adjusted gross income from 2 years ago.
Income-Related Monthly Adjustment (IRMAA)
If your income exceeds certain thresholds, your Part B premium increases. Higher earners pay more. Current thresholds and amounts change annually—check Medicare.gov for this year's brackets to see where you fall.
Deductible Applies Once Per Year
After you meet your annual Part B deductible, Medicare typically pays 80% of covered services and you pay 20% (coinsurance).
20% of Approved Amount
For most services after you've met the deductible, you pay 20% of what Medicare approves. There's no out-of-pocket maximum for Original Medicare Part B alone—this is why Medigap is often added.
Preventive Services
Original Medicare covers many preventive services with no cost-sharing: annual wellness exams, cancer screenings, vaccinations, and other preventive care. These are covered at no cost (after Part B premium) because Medicare incentivizes preventive care.
Part D Costs (Prescription Drug Coverage)
Part D is optional but important. If you don't enroll when eligible and go without coverage, you'll face a late enrollment penalty on your Part D premium for life.
Part D Plan Premium
Varies by Plan ($10-$30+ Per Month)
Part D premiums differ by plan and insurer. Plans with lower premiums may have higher deductibles or copays. Plans with higher premiums might cover more drugs at lower costs.
Plan-Specific (Usually $100-$500)
Each Part D plan sets its own deductible. You pay this before Part D coverage begins. Some low-premium plans have higher deductibles.
Variable Cost-Sharing
Once you and your insurer spend a certain amount on covered drugs, you enter the "coverage gap." In the gap, you pay a higher percentage of drug costs. The gap closes when your out-of-pocket spending reaches a cap, and catastrophic coverage kicks in.
Kicks In After Out-of-Pocket Limit
Once you've spent enough out-of-pocket on covered drugs, Medicare covers most remaining costs for the rest of the year.
Your best strategy for Part D is to match the plan's formulary (list of covered drugs) to the medications you actually take. A low-premium plan may cost more overall if your medications aren't well-covered.
Medicare Advantage Costs in Minnesota
Medicare Advantage plans vary by county and carrier in Minnesota. Costs depend on the specific plan, location, and how much healthcare you use.
Typical MA Costs
Often $0 to $100+ Per Month
Many MA plans in Minnesota have low or no premiums. You still pay your Part B premium separately.
Typically $10-$30 Per Visit
Most MA plans charge a copay when you see a doctor. The amount varies by plan and type of service.
Annual Limit on What You Pay
Many Medicare Advantage plans include an annual out-of-pocket maximum. Once you reach this limit, the plan may cover 100% of in-network services for the rest of the year. Maximum amounts vary significantly by plan, location, and year — check Medicare.gov for current plan details in your area.
Usually Included
Most MA plans include Part D coverage. You may pay copays at the pharmacy, but many MA plans offer competitive drug coverage.
The MA Cost Trade-off
Medicare Advantage plans may have low premiums, but you pay more when you use services. The good news: the out-of-pocket maximum provides certainty about your worst-case annual costs. If you're healthy and rarely see doctors, MA costs may be lower. If you have chronic conditions, costs could add up to the out-of-pocket maximum.
Medigap (Medicare Supplement) Costs in Minnesota
With Medigap, you keep Original Medicare but add a Medigap policy to cover costs that Medicare doesn't. Medigap premiums tend to be more predictable year-to-year than MA costs.
Typical Medigap Costs
Based on Income (Varies Annually)
You pay whatever Part B premium applies to you based on your income and the current year.
Varies by Plan Type, Age, and Insurer
Medigap premiums depend on which plan letter you choose, your age, your location in Minnesota, and which insurance company you select. Premiums generally increase with age. Contact multiple carriers or work with an independent advisor to compare rates for your situation.
Purchase Separately ($10-$30+ Per Month)
With Medigap, you buy Part D separately. This means you have more flexibility to choose the plan that covers your specific medications best.
Covered by Medigap (Plan-Dependent)
Depending on which Medigap plan you choose, you may have zero additional out-of-pocket costs after your premiums. Plan G covers most Medicare deductibles and coinsurance, making your total costs more predictable.
The Medigap Advantage
Medigap provides predictability: you know roughly what you'll pay each month. There's no surprise annual bill when you reach an out-of-pocket maximum. This can be valuable if you have chronic conditions and use healthcare frequently.
Ways to Reduce Your Medicare Costs
Extra Help/Low-Income Subsidy (LIS)
If your income and resources are limited, you may qualify for Extra Help—a federal program that pays Part D premiums and reduces out-of-pocket drug costs.
Extra Help Program
Who qualifies: Individuals with income up to roughly 150% of federal poverty level and limited resources.
- Part D premium may be paid for you
- No coverage gap ("donut hole")
- Lower copays and coinsurance for drugs
Apply at Social Security.gov or call 1-800-772-1213.
Medicare Savings Programs (MSP)
Minnesota offers state-run programs that help pay Medicare premiums and cost-sharing for those with limited income:
Qualified Medicare Beneficiary (QMB)
Covers Part A and B premiums, deductibles, and coinsurance for those with income up to 100% of federal poverty level.
Specified Low-Income Medicare Beneficiary (SLMB)
Covers Part B premiums for those with income between 100-120% of federal poverty level.
Qualifying Individual (QI)
Helps pay Part B premiums for those with income between 120-135% of federal poverty level.
Minnesota Medical Assistance & MinnesotaCare
Minnesota residents with limited income may qualify for state Medicaid (Medical Assistance) or MinnesotaCare, which can help cover Medicare costs and other healthcare needs.
Medical Assistance
Minnesota's Medicaid program for low-income individuals. Can help pay Medicare premiums and deductibles. Income limits apply.
MinnesotaCare
A subsidized health insurance program for uninsured Minnesotans. Coverage may begin before Medicare eligibility and can help bridge the gap.
Contact Minnesota Department of Human Services to apply for these programs: dhs.state.mn.us
Preventive Care (No Cost)
Take advantage of free preventive services covered by Medicare. Annual wellness exams, cancer screenings, vaccinations, and cardiovascular tests are covered at no cost when you use an in-network provider.
Out-of-Pocket Maximums Explained
Original Medicare + Medigap
There is no out-of-pocket maximum in Original Medicare alone. This is why most people add Medigap—the Medigap plan caps what you pay, typically through its monthly premium and any residual copays.
Medicare Advantage
Many MA plans include an annual out-of-pocket maximum. Once you reach this limit, the plan may pay 100% of in-network services for the rest of the calendar year. Maximum amounts vary by plan — check specific plan details on Medicare.gov. This can provide a safety net if you have a serious illness or multiple hospitalizations.
Planning Your Medicare Budget
Step 1: Estimate Your Annual Costs
- Part A premium (likely $0 if you qualify)
- Part B premium (check current year amount on Medicare.gov)
- Part D premium (varies by plan you choose)
- Medigap OR Medicare Advantage premium
- Estimated copays/coinsurance based on your health and typical doctor visits
Step 2: Check Your Income Threshold
If your income is higher, your Part B premium may be higher (IRMAA). Check your Modified Adjusted Gross Income from 2 years ago to estimate your Part B cost.
Step 3: Compare Plans
Use Medicare.gov's Plan Finder tool to compare costs for Medicare Advantage and Part D plans available in your Minnesota county. Plug in your medications to see which plans cover them best.
Step 4: Check Eligibility for Help Programs
If income is limited, apply for Extra Help, Medicare Savings Programs, or Minnesota Medical Assistance to reduce your costs.
Key Takeaways
- Medicare has real costs: premiums, deductibles, copays, and coinsurance.
- Part A is usually free; Part B premium varies by income (IRMAA for higher earners).
- Part D premiums and structure vary significantly by plan and your medications.
- Medicare Advantage has low premiums but may have higher copays and usage-based costs; it does have an annual out-of-pocket maximum.
- Medigap has higher premiums but more predictable costs; there's no out-of-pocket maximum but Medigap covers cost-sharing.
- Extra Help and Minnesota Medicare Savings Programs can reduce costs if your income is limited.
- Preventive care is free with Medicare; take advantage of these covered services.
- Compare plans for your specific medications and doctors to find the best value.
Ready to Compare Your Options?
We help Minnesotans understand their costs and compare Medicare plans to find the best fit for their budget and health needs.
Schedule a Free Consultation