MinnesotaCare Tax Exemptions

Payments you receive from Medicare and Medicare managed-care plans for Medicare-covered services are exempt.

The exemption includes:

• Deductibles, coinsurance, and copayments required by Medicare for Medicare-covered services, whether paid by patients or supplemental insurance plans
• ​Settlement adjustment payments from Medicare

The exemption does not include amounts from:

• Third-party insurers when Medicare is not the primary insurer
• ​Patients or their insurers for health care services not covered by Medicare

For more information on Medicare-covered services and plans, go to Medicare's website.

​Payments you receive from certain government programs for health care services you provide are exempt.

The exemption includes payments from the following government sources:

• Behavioral Health Fund
• Federal Head Start programs
• Federal, state, or local government agencies for services provided to prison inmates
• Migrant Health Service Project
• Minnesota Board of Medical Practice
• Minnesota Department of Employment and Economic Development
• Minnesota Department of Public Safety
• Minnesota Department of Veterans Affairs
• Minnesota State Services for the Blind
• State of Minnesota for detoxification services
• State of Minnesota for rehabilitation services
• U.S. Bureau of Prisons
• U.S. Indian Health Service
• U.S. Public Health Service

The exemption also includes payments from the following entities or programs, if funded entirely by federal, state, or local government agencies:

• Adult detention centers
• Crime victims reparation programs
• Gambling treatment programs
• Home schools
• Juvenile detention centers

The exemption does not include payments from:

• CHAMP VA
• Federal, state, or local government employee insurance plans
• Medical Assistance (MA)
• Minnesota Comprehensive Health Association (MCHA)
• MinnesotaCare
• Prepaid Medical Assistance Programs (PMAP)
• U.S. Department of Veterans Affairs
• Workers Compensation

​Payments you receive from FEHBA and the federal TRICARE programs are exempt.

Deductibles, coinsurance, and copayments are not exempt. The exemption also does not include payments from the following sources:

• CHAMP VA
• FEDVIP
• Project Hero

For more information on participating insurance carriers, see the FEHBA information at OPM.gov or go to TRICARE's website.

Payments you receive from other health care providers, hospitals, and surgical centers responsible for paying tax on health care services you provide are exempt.

Payments are also exempt if you receive them from any entities, including those not subject to tax, that are reimbursed for health care services you provide by any of the following:

• Medicare and Medicare deductibles, coinsurance, and/or copayments
• Behavioral Health Fund
• Federal, state, or county government programs, not including Medical Assistance and MinnesotaCare
• FEHBA or TRICARE, not including enrollee deductibles, coinsurance, and/or copayments

Payments you receive from sponsors of health care research and other entities (such as medical device manufacturers) for providing patient services through a formal health care research program are exempt.

Research must be conducted in conformity with federal regulations governing research on human subjects. Amounts you receive from patients or their insurers for services provided as part of the research are not exempt.

Charitable Donations

Charitable donations you receive are exempt if you use them for health care services not designated for a specific individual or group. Charitable donations that are designated for a specific individual or group are taxable.

Private grants in the nature of a charitable donation qualify for this exemption. Government grants do not qualify for this exemption. However, grants from government agencies that are not funded by Medical Assistance may be exempt as a government payment. See Other Government Agencies for more information.

Home Health Care Services

Home health care services are services provided in a patient’s residence by a licensed home health agency, personal care provider, or home care nursing service that is eligible to participate in the Medical Assistance program, or home care providers licensed by the Department of Health.

Payments you receive from patients and their insurers for home health care services you provide in a patient’s residence are exempt.

Payments you receive from the retail sale of health care supplies and equipment, including drugs, used as part of the services you provide in the patient’s residence are also exempt.

Legend drugs are drugs or gases required by federal law to be sold or dispensed in a container labeled with one of the following statements:

• “Caution:  Federal law prohibits dispensing without prescription”
• “Rx only”

Legend drugs or gases must be:

• Purchased from a wholesaler who is subject to MinnesotaCare Wholesale Drug Distributor Tax
• Classified by the FDA as a drug and not a device

Nutritional products, blood, and blood components are not considered legend drugs. However, blood derivatives derived from blood, plasma, or serum through a chemical manufacturing process are considered legend drugs.

There are two methods you can use to calculate the Legend Drug Exemption. If you cannot use Method 1, you must use Method 2.

Method 1

You may claim the actual amount you paid for the legend drugs, less any reimbursements you received for the drugs that are exempt under MinnesotaCare tax law (such as drugs reimbursed by Medicare). These reimbursements are included in the other exemption amounts reported on your return.

Method 2

If you cannot determine the actual drug costs and exempt reimbursement amounts, you must use a calculation to determine your allowable exemption.

You can use the step-by-step instructions below to complete the calculation, or you can use our Legend Drug Exemption Calculator to make this calculation for you.

Enter the number from Step 6 above, or the Legend Drug Exemption Calculator’s result, on the Legend Drug Exemption line when you file your annual return.