Medicare provides critical health benefits to millions of seniors today, but knowing how the program works is crucial on the road to planning and saving for retirement. In fact, 67% of future retirees aged 50 and over say they wish they had a better understanding of how Medicare works, according to a recent Nationwide survey. If you're one of them, here are some helpful points that'll help get you started.

1. It consists of various parts

One potentially confusing aspect of Medicare is the fact that it's composed of several distinct parts, each of which comes with different rules and costs. Part A covers hospital visits and skilled nursing care; Part B covers preventive care, doctor visits, and diagnostics; and Part D covers prescription medications.

As an alternative to these various parts, you can instead sign up for Part C, which is Medicare Advantage. Medicare Advantage works similarly to the health insurance you might have through your employer: You sign up for a single plan that covers your various health needs.

Pen resting on Medicare enrollment form


2. It's not free

Many people assume that it doesn't cost anything to enroll in Medicare, but that's largely false. Though Part A is free for most enrollees, Parts B and D, as well as Medicare Advantage, typically charge premiums, just like the premiums you or your employer pay for your health coverage during your working years. On top of those premiums, you'll be liable for deductibles, coinsurance, and copays, the amount of which will depend on the coverage you opt for.

3. It doesn't cover everything

Medicare doesn't cover everything. Many Advantage plans will pay for dental, vision, and hearing services, but original Medicare offers limited coverage in these categories. For example, you'll generally only get your dental work paid for if it's tied into another condition being treated or if a dental exam is needed prior to a covered surgery. And while original Medicare will pay to screen for and treat certain eye diseases, like glaucoma, it won't cover the cost of vision tests or prescription eyeglasses.

Furthermore, Medicare won't pay for long-term care like home health aides, assisted living, or nursing homes if the care in question is custodial in nature -- meaning required for everyday living, as opposed to addressing a purely medical need.

4. Supplemental insurance is often a necessity

If you sign up for original Medicare, prepare to spend extra money on Medigap, or supplemental insurance. Medigap won't pay for services not covered by Medicare, but it will help cover the cost of expenses like deductibles and copays.

5. You have choices

Within original Medicare, you have the option to choose the Part D plan that works best for you. And if you opt for Medicare Advantage, you can compare your plan choices to see which one makes the most sense.

Furthermore, you're not stuck with your original plan for life. If you're not happy with your coverage, you can switch plans during Medicare's annual open enrollment period, which runs from October 15 through December 7 each year.

Get schooled on Medicare

The costs you encounter under Medicare will need to be factored into your retirement budget, so it pays to educate yourself about the program well before you gear up to leave the workforce permanently. That way, you'll be better equipped to assess your savings and make financial choices that don't leave you cash-strapped during your senior years.

Remember, healthcare is one of the greatest expenses seniors tend to face, and reading up on Medicare will help you avoid going into retirement ill-prepared.