Although 86% of older Americans are currently enrolled or are planning on enrolling in Medicare, 72% say they don't fully understand how the program works and wish they had a better understanding of it, according to a survey from Nationwide Retirement Institute and The Harris Poll.

Not understanding how Medicare works can be an incredibly expensive mistake. Healthcare is one of the biggest expenses Americans face during retirement: The average 65-year-old couple is expected to spend roughly $280,000 on healthcare costs alone during their golden years, according to Fidelity Investments. If you don't fully understand what you're signing up for when you enroll in Medicare, you could end up paying more than you expected -- and drain your retirement fund in the process.

Medicare enrollment form on a table with a red pen sitting on it.

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There are several misconceptions about Medicare, and the more you understand about how it works, the better off you'll be during retirement.

Myth No. 1: Medicare covers all your healthcare expenses

In general, Medicare typically covers medically necessary care. Services such as hospital visits, skilled nursing-facility care, and x-rays and lab tests, for example, are usually covered by Medicare Parts A and B (or original Medicare). However, most Medicare coverage doesn't pay for the entire cost of services. For instance, Medicare typically pays 80% of medical care covered by Part B, leaving you responsible for the remaining 20%. In addition, there are some services, such as dental care, routine eye exams, and hearing tests, that aren't covered at all.

Getting left to foot 20% of the bill can get expensive. In addition, Parts A and B also don't cover prescription drugs, and you'll need to enroll in Medicare Part D for prescription-drug coverage.

There are a couple ways to address these gaps in coverage. Some people turn to a Medicare Advantage plan (sometimes referred to as Medicare Part C) instead of original Medicare. Advantage plans are offered through private insurance companies -- similar to the insurance you likely had through your employer -- and they typically cover not only everything Medicare Parts A and B cover but also somewhat more. Not all Advantage plans include prescription-drug coverage, but many do. Alternatively, those who prefer original Medicare often choose to get a Medigap supplemental insurance policy to fill coverage gaps. Either way, you have a wide variety of options to meet all your healthcare needs.

Myth No. 2: Coverage is free

More than half of older Americans mistakenly believe you don't have to pay anything for Medicare, according to Nationwide's survey. Even if Medicare will cover many of your healthcare expenses, you still have to pay premiums, deductibles, copays, or coinsurance -- and these expenses can add up.

For original Medicare, you don't need to pay a monthly premium for Part A coverage (as long as you paid taxes during your career). However, for 2019, you'll have a deductible of $1,364, as well as coinsurance costs. For Part B, you'll pay a monthly premium of $135.50 with a deductible of $185 per year. Once you meet the deductible, you'll pay 20% of your out-of-pocket expenses.

For Medicare Part D and Medicare Advantage and Medigap plans, the costs will vary depending on the plan. There are dozens of plans available, and each is slightly different. So you'll need to do your research to decide which one is the most cost effective for your unique situation.

Myth No. 3: You can enroll at any time

Although you can't enroll whenever you want to, there are several times when you can sign up. If you're enrolling in Medicare for the first time, you have from three months before your 65th birthday until three months after your 65th birthday to sign up. There also are special enrollment periods that apply in certain situations, such as a change in family status or the loss of employer coverage for those still working when they turn 65. These special enrollment periods give you another opportunity to enroll in Medicare Parts A and B or an Advantage plan.

In addition, for Part D plans in particular, there are other situations that can trigger the special enrollment periods, such as moving to a new area that your current provider doesn't serve, or if your current plan stops serving your location.

You also have the opportunity to enroll during the general enrollment period and open enrollment period. The general enrollment period runs from January 1 through March 31 during which time you can only sign up for Medicare Parts A and B. The open enrollment period is more flexible. It runs from October 15 through December 7, and you can switch from original Medicare to an Advantage plan (or vice versa), sign up for or drop Part D coverage, or change to a new Advantage plan.

If you don't enroll during one of the regular or special enrollment periods, you'll often have to pay a penalty when you do sign up. For each year you were eligible for Medicare coverage but didn't enroll, your monthly Part B premium will increase by 10% -- for life.

Medicare is a confusing topic, and most people don't particularly enjoy thinking about health insurance. But if you don't understand some of the basic ins and outs of the program, it could end up costing you.

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