When people talk about Medicare coverage, you usually hear about two main choices: Original Medicare and Medicare Advantage.
But Minnesota beneficiaries may have another option that isn’t available in most parts of the country: a Medicare Cost Plan.
Medicare Cost Plans combine some characteristics of Original Medicare with some characteristics of private Medicare health plans. That can make them confusing at first — but the basic concept is actually fairly straightforward.
Let’s look at what a Medicare Cost Plan is and how it differs from Original Medicare and Medicare Advantage.
What Is a Medicare Cost Plan?
A Medicare Cost Plan is a type of Medicare health plan offered by a private insurance company under a contract with Medicare.
Like a Medicare Advantage plan, a Cost Plan generally has a network of doctors, hospitals and other healthcare providers.
But there’s a major difference:
With a Medicare Cost Plan, you can generally receive care outside the plan’s network and have that Medicare-covered care handled through Original Medicare.
That’s the feature that makes Cost Plans different from most Medicare Advantage plans.
Think of a Medicare Cost Plan as offering two ways to receive Medicare-covered healthcare:
Inside the Cost Plan network: You use the plan’s participating providers and follow the plan’s rules and cost-sharing.
Outside the Cost Plan network: You can generally use providers who accept Medicare, with the Medicare-covered service handled under Original Medicare and Original Medicare cost-sharing applying.
That flexibility can make Medicare Cost Plans particularly interesting for some Minnesota beneficiaries.
How Does Original Medicare Work?
Original Medicare is administered by the federal government and consists of:
Part A — Hospital Insurance
Part B — Medical Insurance
With Original Medicare, you can generally see any doctor or use any hospital in the United States that accepts Medicare.
There isn’t a Medicare provider network restricting you to a particular insurance company’s participating doctors.
When you receive a Medicare-covered service, Medicare pays its share and you’re responsible for your share of the cost.
Original Medicare does not include most outpatient prescription drug coverage, so beneficiaries who want prescription coverage can generally enroll in a separate Medicare Part D plan.
Beneficiaries may also purchase Medicare Supplement insurance, commonly called Medigap, to help with certain costs that Original Medicare doesn’t pay.
How Does Medicare Advantage Work?
Medicare Advantage — also called Medicare Part C — works differently.
Medicare Advantage plans are offered by private insurance companies approved by Medicare.
When you enroll in Medicare Advantage, the private plan becomes the way you receive your Medicare Part A and Part B benefits.
Medicare Advantage plans must cover the Medicare-covered services required by Medicare, and many plans offer additional benefits.
Depending on the plan, these might include benefits involving:
- Prescription drugs
- Dental services
- Vision services
- Hearing services
- Fitness programs
- Other supplemental benefits
Most Medicare Advantage plans use provider networks.
An HMO, for example, generally requires members to receive non-emergency care from participating providers except in certain circumstances.
PPO plans usually provide more flexibility to receive out-of-network care, but the member may pay more for it.
How Is a Medicare Cost Plan Different?
The easiest way to understand a Cost Plan is to compare what happens when you want to receive healthcare outside the plan’s network.
Original Medicare
There isn’t a private-plan network.
You can generally use any doctor or hospital in the United States that accepts Medicare.
Medicare Advantage
The private plan provides your Medicare-covered healthcare.
Your access and costs may depend on the plan’s network and whether you have an HMO, PPO or another type of Medicare Advantage plan.
Medicare Cost Plan
You can use the Cost Plan’s network, often receiving services according to the plan’s benefits and cost-sharing.
But you can also generally go outside that network to a provider who accepts Medicare.
When you do, Original Medicare generally covers the Medicare-covered service and Original Medicare cost-sharing applies.
That’s the key distinction.
A Simple Example
Suppose you’re enrolled in a Medicare Cost Plan in Minnesota.
At home, you normally use doctors and clinics participating in your Cost Plan’s network.
You then spend several months somewhere else in the United States.
You need to see a physician while you’re away, but that physician isn’t part of your Cost Plan’s network.
If the physician accepts Medicare, you can generally receive the Medicare-covered service through Original Medicare, subject to Original Medicare’s rules and costs.
That’s quite different from being enrolled in a Medicare Advantage HMO, where non-emergency, non-urgent out-of-network care generally isn’t covered except in limited circumstances.
What About Prescription Drug Coverage?
Medicare Cost Plans have some unusual flexibility when it comes to prescription drugs.
Depending on what’s offered, you may be able to receive prescription drug coverage through the Cost Plan.
But Medicare also allows Cost Plan members to enroll in a separate Medicare Part D prescription drug plan.
This is an important difference from Medicare Advantage.
If you’re enrolled in most Medicare Advantage plans that include prescription drug coverage, you generally can’t simply add a separate standalone Part D plan.
With a Medicare Cost Plan, separate Part D coverage can be an option.
Always check the specific Cost Plan and drug coverage rules before enrolling.
Can You Leave a Medicare Cost Plan?
Another unusual feature of Medicare Cost Plans is enrollment flexibility.
Medicare says you can generally join a Medicare Cost Plan whenever the plan is accepting new members.
Medicare also says you can leave a Medicare Cost Plan at any time and return to Original Medicare.
Rules involving prescription drug coverage are different, however. You can only add or drop Medicare prescription drug coverage during certain enrollment periods.
Are Medicare Cost Plans Available Everywhere?
No.
In fact, Medicare Cost Plans are available in only limited areas of the United States.
Minnesota is one of the states where they remain particularly relevant.
For 2026, Medicare Cost Plans are available in 21 Minnesota counties:
Aitkin, Carlton, Cook, Goodhue, Itasca, Kanabec, Koochiching, Lake, Le Sueur, McLeod, Meeker, Mille Lacs, Pine, Pipestone, Rice, Rock, St. Louis, Sibley, Stevens, Traverse and Yellow Medicine.
That means whether a Medicare Cost Plan is an option for you depends heavily on where you live.
Why Are Cost Plans Still Available in Some Minnesota Counties?
Federal law limits where Medicare Cost Plans can continue operating when sufficient Medicare Advantage competition exists.
As Medicare Advantage expanded, many Cost Plans disappeared from areas where enough competing Medicare Advantage options became available.
That’s one reason Cost Plans aren’t available throughout Minnesota.
However, they continue to be available in certain Minnesota counties.
Original Medicare vs. Medicare Advantage vs. Medicare Cost Plan
Here’s a simple way to compare the three:
| Feature | Original Medicare | Medicare Advantage | Medicare Cost Plan |
|---|---|---|---|
| Who administers coverage? | Federal Medicare program | Private Medicare-approved plan | Private plan contracting with Medicare |
| Part A & B coverage | Original Medicare | Through the MA plan | Cost Plan network and Original Medicare mechanisms |
| Provider network | No plan network | Usually yes | Yes, but you can generally go outside it |
| Out-of-network Medicare providers | Generally yes if provider accepts Medicare | Depends on plan type and rules | Generally yes through Original Medicare |
| Prescription coverage | Separate Part D available | Usually included; varies by plan | May be offered by plan or separate Part D may be available |
| Supplemental benefits | Generally not included | May be included | Depends on plan |
| Availability | Nationwide | Depends on ZIP code/county | Limited geographic areas |
| Can generally leave plan anytime for Original Medicare? | Not applicable | Enrollment-period rules apply | Yes |
Why Might Someone Consider a Medicare Cost Plan?
A Medicare Cost Plan may appeal to someone who values provider flexibility.
For example, it may be worth investigating if you:
- Want access to a local plan network
- Want the ability to use Original Medicare outside that network
- Travel frequently within the United States
- Spend part of the year in another state
- Want flexibility when choosing doctors or hospitals
- Live in a Minnesota county where Cost Plans remain available
For Minnesota snowbirds, that combination may deserve particular attention.
But flexibility alone doesn’t determine whether a Cost Plan is right for you.
You also need to consider premiums, deductibles, copays, prescription coverage, providers and your individual healthcare needs.
Is a Medicare Cost Plan the Same as a Medicare Supplement?
No.
The names can make this confusing.
A Medicare Cost Plan is a Medicare health plan.
A Medicare Supplement policy works alongside Original Medicare to help pay certain costs that Original Medicare doesn’t cover.
They’re different types of coverage.
When someone refers to a “Cost Plan,” don’t assume they’re talking about Medicare Supplement insurance.
Which Medicare Option Is Better?
There isn’t one answer that applies to everyone.
Original Medicare, Medicare Advantage and Medicare Cost Plans each work differently.
The better question is:
Which type of coverage best fits your healthcare needs?
Consider:
- The doctors and hospitals you want to use
- Where you live
- How frequently you travel
- Whether you spend part of the year outside Minnesota
- Your prescription medications
- Monthly premiums
- Deductibles and copays
- Potential out-of-pocket costs
- Additional benefits that matter to you
And remember that Medicare plan availability varies by county.
The Bottom Line
Medicare Cost Plans occupy an unusual place in the Medicare system.
They provide access to a private plan’s network while generally allowing members to receive Medicare-covered services outside the network through Original Medicare.
That’s what separates them from most Medicare Advantage plans.
And because Medicare Cost Plans are available in only limited areas of the country — including certain Minnesota counties — many Medicare beneficiaries have never encountered them.
For Minnesotans who do have access to a Cost Plan, however, it’s an option worth understanding.
Medicare Guidance for Minnesotans
At YourMedicareMN, our focus is education first.
Understanding the differences between Original Medicare, Medicare Advantage, Medicare Cost Plans and Medicare Supplement coverage can make it easier to evaluate which approach fits your individual healthcare needs.
Medicare doesn’t have to be one-size-fits-all.
Visit Contact Us to schedule a personalized Medicare review and get answers tailored to your situation.
For official Medicare information, visit the Medicare.gov website.
YourMedicareMN is not connected with or endorsed by the U.S. government or the federal Medicare program. Plan availability and benefits vary by location and plan. Contact the plan or Medicare for complete plan information.
Learn first. Decide With Confidence.