Millions of seniors rely on Medicare for health coverage, but misunderstanding how the program works could make for a financially rocky retirement. Here are a few aspects of the program that tend to catch retirees off guard.

1. Medicare isn't free

Many people don't realize that Medicare is not free healthcare. Though Part A, which covers hospital visits, is generally free for enrollees (meaning, there's no premium to pay for it), Part B, which covers outpatient care, charges a monthly premium that usually increases from year to year. In addition to paying for Part B, you'll need to factor in the cost of a Part D drug plan and supplemental insurance (Medigap). Or, you might opt for Medicare Advantage instead, which could come with a premium of its own. Either way, plan on paying for the privilege of enrolling in Medicare.

Doctor showing scan to older woman

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2. Higher earners pay more

The standard Medicare Part B premium today is $144.60 per month. In 2021, it will rise to $148.50. But if you're a higher earner, you'll pay more. Medicare premiums are subject to income-related monthly adjustment amounts, or IRMAAs. In 2021, those IRMAAs will kick in if your income from two years prior exceeds $88,000 as a single tax filer or $176,000 as a married couple filing jointly. If you have a robust retirement income between your Social Security benefits, retirement plan withdrawals, and other sources, then you'll need to prepare to pay up for Medicare.

3. Many services aren't covered

Original Medicare doesn't pay for a lot of commonly used health services -- dental care, vision exams, and hearing screenings. If you stick with original Medicare, you'll need to cover these costs yourself. Or, you can look for a Medicare Advantage plan, since many will pick up the tab for these expenses.

4. Sticking with the same Part D plan doesn't guarantee the same coverage

Some seniors opt to stay on the same Part D plan year after year. But doing so won't necessarily mean enjoying the same level of coverage. Part D plans have formularies that group medications into different tiers, and those formularies can change from one year to the next. This means that a medication you're on might eventually cost you more if you insist on sticking with the same plan.

5. Medicare Advantage plans can be extremely limiting

Though Medicare Advantage plans can cover a lot of services that original Medicare won't, they also limit you to a specific network of providers that may prove restrictive given your retirement plans. For example, if you travel frequently to another state to see family, you may be out of luck if you need to seek medical care there. Be mindful when choosing your coverage to avoid having to pay for out-of-network care on a regular basis.

The more you read up on Medicare ahead of retirement, the less likely it is to become a source of financial stress. Remember, healthcare is the one expense that tends to go up during your senior years, so the more you prepare for it, the better.