One in 4 Americans think that Medicare is free for everyone, according to new data from Allianz. 

The problem is, that’s not true.

The research exposed three more things folks get wrong about how Medicare works. 

More than a third of Americans believe Medicare covers long-term care. It does not. 

More than 1 in 3 say Medicare is guaranteed to be available when you retire, and more than 4 in 10 think it covers prescription drugs.

These are profound misunderstandings of how Medicare, which provides health insurance coverage to roughly 70 million people in the US, works and what expenses it covers.

It’s an accident waiting to happen as healthcare costs, one of the biggest expenses for retirees, keep surging. 

 “Americans clearly understand that healthcare costs can threaten their retirement security,” Kelly LaVigne, vice president of Consumer Insights at Allianz Life, told Yahoo Finance. But “so many don’t fully understand what Medicare will and won’t cover. And the details matter.” 

Read more: How to add or adjust your Medicare coverage 

Roughly 15% of the average retiree’s annual expenses will be health-related, according to Fidelity. On average, a 65-year-old who leaves the workforce this year may need $185,500 in savings to cover out-of-pocket healthcare expenses throughout retirement.

That doesn’t even include long-term care expenses, over-the-counter medications, and most dental services.

Let’s dispel a few of these myths Americans have about Medicare. 

Fact: Medicare has a price tag, including prescription drug costs. 

Medicare has premiums, deductibles, and out-of-pocket expenses for people using the program. 

People with traditional Medicare generally pay a monthly premium for physician coverage, Part B, and for prescription drug coverage, Part D. Those premiums vary by plan. Some people pay a monthly premium for inpatient hospital coverage, Part A.

Each year the Medicare Part B premium, deductible, and coinsurance rates are reset. If you’re enrolled in traditional Medicare, you have a Part D drug plan. The 2027 Part D base premium is $36 per month on average, but yours could be higher.

“For 2027, we’re seeing monthly premiums for some standalone prescription drug plans increasing by more than $50 a month,” said Juliette Cubanski, director of the program on Medicare policy at KFF, “and some will have an increase of as much as $100 a month.”

Most Part D enrollees will face a deductible for drug coverage in 2027. The standard Part D deductible will jump to $700 next year, up from $615. And in 2027, everyone enrolled in Part D prescription drug plans will have their annual out-of-pocket drug costs capped at $2,400.

Even though the program offers fairly comprehensive coverage, traditional Medicare does not have a maximum out-of-pocket limit each year.

The largest coverage issue for many people enrolled in original Medicare is that it pays only 80% of expenses in Part B, which covers doctors, outpatient care, and durable medical equipment.

For that, you typically need to purchase a Medigap health insurance policy, sold by private insurance companies, that pays for the remaining expenses. 

Fact: Medicare does not cover nursing homes and other long-term care costs.

Long-term care costs are on you. An apartment in an assisted-living facility is averaging $87,000 this year, according to the National Investment Center for Seniors Housing & Care — and costs go up as residents age and need more care. Units for dementia patients have an average rate of $105,000.

“The long-term care misconception may be the most concerning,” LaVigne said.

“Medicare can cover some nursing and rehab after a three-day hospital stay, but it does not pay for long-term care. That’s a critical distinction, because a single long-term care event can wipe out a lifetime of retirement savings virtually overnight.”

Fact: Medicare eligibility kicks in at 65. 

Medicare coverage isn’t linked to the date you exit the workforce. It begins for most Americans at 65 who are not covered by an employer-provided healthcare plan. 

The initial enrollment period is the three months before, the month of, and the three months after your 65th birthday. Miss your sign-up, and you start racking up late enrollment penalties and risk gaps in coverage.

 “Medical expenses only increase as you age,” LaVigne said. “Understanding what Medicare does and doesn’t pay for is an important part of building a retirement strategy.”

Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist and the author of 14 books, including “Retirement Bites: A Gen X Guide to Securing Your Financial Future,” “In Control at 50+: How to Succeed in the New World of Work,” and “Never Too Old to Get Rich.”