Everyone is worried about soaring health care costs, and that includes older affluent Americans, according to a new report released Tuesday by The Nationwide Retirement Institute.

Seventy-three percent of affluent older adults in the survey ranked the costs of health care as a major concern in retirement, and 64% of future retirees said they were “terrified” about what those costs could do to their retirement plans.

The Harris Poll conducted the online survey on behalf of the insurance company in February among 1,007 U.S. adults 50 or older with a household income of $150,000 or more.

Eighty-six percent of older survey respondents reported that they were enrolled in, or planned to enroll in, Medicare. At the same time, 72% said they wished they better understood what they were signing up for.

(Related: 5 Tips to Plan for Health Care Costs in Retirement)

These were among the things respondents did not know about Medicare:

  • Medicare Part B is not free even for someone who has worked and paid Social Security taxes for at least 10 years: 53%
  • A person cannot enroll in Medicare at just any time: 23%
  • Medicare does not cost the same for everyone: 29%
  • Future changes will affect the ability to sign up for Medigap/Medicare supplement plans: 62%

“With changes coming to Medicare, premiums will increase for high-income retirees, making it even more important for future retirees to understand the details and incorporate the program as part of a comprehensive retirement plan,” John Carter, president of retirement plans for Nationwide, said in a statement.

In a particularly disturbing survey result, 42% of older affluent adults with children said they would give away all their money to their children so they could be eligible for Medicaid-funded long-term care.

“Affluent adults should not be planning to rely on Medicaid,” Carter said. “Not only is the program not designed for them, they lose personal control when it comes to long-term care.”

Health Costs Haunt Retirement

Fifty-three percent of affluent older Americans in the survey said they were unsure or could not estimate what their annual health care would cost, and 65% said the same about their long-term care costs in retirement.

Respondents who did estimate expected annual health care costs put the amount at about $22,849 for themselves or for themselves and their partner, if married.

“Health care costs are the biggest expected expense in retirement and should be a major factor when estimating retirement expenses since they are often costly and unexpected,” Carter said.

“Our survey found that 39% of adults immediately associate health care with high costs. Yet, very few know what the actual costs could be, which makes planning difficult.”

The survey made clear that many affluent older adults are not prepared to pay for health care costs they know are coming:

  • 27% said they could not cover more than $1,000 in unplanned expenses
  • 44% could not cover more than $4,000
  • 60% could not cover more than $5,000

Six in 10 respondents said they paid or planned to cover unplanned expenses with disposable income. Forty-two percent said they used or would use 401(k) withdrawals, 33% said a savings fund specifically for this type of expense and 17% said credit cards.

Eighty-seven percent of future retirees in the survey reported that they were taking actions to save for health care costs in retirement. Fifty-nine percent were building their savings account, 56% investing, 46% increasing their 401(k) contributions and 36% paying off credit card debt and loans.

Although half of employed affluent adults in the survey said they had access to a health savings account through their employer, only 30% said they participated in or contributed to the HSA.

Of those that did use HSAs, only 35% did so as a long-term savings vehicle for health care expenses in retirement and to cover today’s health care expenses.

“It’s promising that most adults are taking action as a result of their concerns,” Carter said. “However, few are planning based on specific, personalized cost estimates, and even fewer are using all the resources available to them.”

Quiet Doesn’t Work

Even though two-thirds of future retirees are beyond scared about the havoc health care costs could create for their retirement plans, many are not engaging in informed conversations to prepare for the eventuality.

The survey found that 52% of those with a financial advisor had not talked with their professional about health care costs — and the most common reason, cited by 21% of them, was that they considered it a personal issue.

Thirty-two percent of affluent adults in the survey said they had not conversed with anyone about their health care costs.

“You can’t adequately plan for health care costs without discussing the topic,” Carter said. “While often considered personal, consumers and advisors need to broach the subject and accurately plan to ensure health care doesn’t negatively impact their retirement.”

To facilitate conversations with clients, Nationwide offers advisors a health care assessment tool that uses proprietary health risk analysis and updated actuarial cost data, including personal health and lifestyle information, health care costs and medical coverage.

It provides a personalized cost estimate to help advisors and clients estimate future medical and long-term care expenses.

— Check out Health Fog Gives You an Opening: Nationwide Exec on ThinkAdvisor.