This Retirement Health Care Expense Can Bankrupt Even Wealthy Clients

"Anyone who has followed the industry over the last decade knows there have been significant premium increases, and lots of people who want the coverage can't get it," Blanchett warns.

Medicare, Medicaid and Long-Term Care

As emphasized in a long-term care guide published on AARP's website, many middle- and upper-income Americans mistakenly believe that Medicare can be relied on to cover the costs of long-term care.

"This is a common misconception," AARP warns. "As a reminder, Medicare is strictly a health insurance program that covers costs related to illnesses and injuries (and, to some extent, their prevention)."

As such, Medicare will help pay for up to 100 days of rehabilitation or skilled nursing care after a major health issue, based on a doctor's recommendation, but longer stays, such as a permanent move into a nursing home, are not covered. While some Medicare advantage plans offer nonmedical services at home, such as meals and installation of grab bars, coverage options can still be highly limited.

Medicaid, on the other hand, does pay for long-term nursing home care, but only for people with very low income and modest savings who can no longer handle basic daily tasks like bathing, toileting, dressing or feeding themselves.

According to AARP's experts, a good rule of thumb is that if one has less than $750 in income per month and less than $2,000 in financial assets (not counting a home), they likely qualify for Medicaid.

"This can exclude a large number of people who draw Social Security, given that the average monthly benefit check is more than $1,600," the guide warns. "Remember that Medicaid is meant to help just the very poor, although sometimes people use up their savings and spend so much of their income on care that they do become eligible."

A Better Way?

Asked to reflect on what could help to improve this dire and worsening situation, Blanchett says a fundamentally different approach may be needed, though he admits that would be a heavy lift for industry leaders and policymakers.

"What I think we need is a better kind of public option," Blanchett argues. "Someone could effectively elect (and pay for) coverage, which would ensure that in the event one spouse does have a health event earlier in retirement, the surviving spouse's retirement after that wouldn't be imperiled."

As Blanchett explains, this is an especially challenging issue for married women.

"Using some loose math, they tend to be two years younger than their spouses on average, and they live, say, three years longer, or call it five additional potential years of planning," Blanchett says. "Again, while certain social networks may come to the rescue (e.g., family) that's not exactly what many older Americans want to rely on, and it could place significant burdens on children/surviving family members."

Pictured: David Blanchett