Millions of seniors get health coverage through Medicare once they retire. But not understanding your benefits could cost you in a very big way.

One huge misconception surrounding Medicare is that it'll cover the cost of your healthcare no matter where you are when you need it. But actually, Medicare coverage only applies in the U.S. and its territories. Travel abroad, and you may be in for a highly unpleasant financial surprise if you require medical treatment in a foreign country.

Older man in sunglasses holds a map while older woman rests her head on his shoulder and looks on

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Medicare's limited scope

The good thing about Medicare is that its coverage within the U.S. is fairly flexible. You can travel to any state or territory and receive care, whether for routine purposes or, in a more likely scenario, emergencies. But once you leave U.S. borders, Medicare usually won't kick in. (The one scenario where you may be entitled to Medicare coverage outside the U.S. is if you're traveling between states and the closest hospital to treat you in an emergency scenario happens to be in Canada.) Therefore, if you're planning to travel a lot outside the U.S., which is a common thing for retirees to do, you'll need to secure coverage to avoid what could be astronomical medical bills.

What might that coverage entail? Some Medigap (supplemental insurance) plans do provide coverage for travel, but you'll be limited to a lifetime maximum that you could easily exceed if you happen to require emergency surgery abroad.

Another option is Medicare Advantage. An alternative to original Medicare, Advantage plans work much like the private insurance you get during your working years. With an Advantage plan, you're generally limited to a specific network of providers contained to a certain geographic region, so it's usually not the best choice if you think you'll be traveling a lot within the U.S., or splitting your time between two states during retirement. But one thing Medicare Advantage is known for is coverage for healthcare issues that arise overseas -- depending on the plan you choose, of course.

A third option? Purchase travel insurance when you know you'll be going abroad. Travel insurance isn't something you pay for annually; you buy it on a trip-by-trip basis once you've made your plans. Not only will travel insurance protect you from losses related to trip interruption or last-minute cancellations due to medical issues, but it will also provide coverage if you fall ill overseas or require emergency care outside the U.S. In many cases, it will also pay for a medical evacuation, should you be in a dire enough situation to need one. The only caveat here is that travel insurance doesn't always cover pre-existing medical conditions, so you'll need to read the fine print before you buy it.

Know your Medicare benefits

Health coverage overseas is only one of many benefits Medicare doesn't offer. To avoid a financial shock, read up on how Medicare works and know what coverage you're entitled to -- whether you're traveling a lot or mostly spending your senior years close to home.