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The Cost of Dementia: Who Will Pay?

Dementia is a chronic disease of aging that robs people of cognitive function, leaving them unable to tend to even the most basic activities of living. But demented persons can live for many years, incurring long-term care bills that can leave surviving spouses impoverished and estates depleted.

In a study published recently in the New England Journal of Medicine, my colleagues and I reported that the total costs of paying for care for seniors with dementia in the United States are expected to more than double by 2040. Medicaid pays these costs for the poor, and some people have private insurance. But for large numbers of elderly Americans, dementia brings not only human suffering but financial ruin as well.

Designing and building a program to protect Americans from the cost of dementia care is a daunting and expensive task, one that probably cannot be accomplished without the help of the federal government. The federal government has broad experience in creating health safety nets and has been expressing concern over the state of the nation’s long-term care systems for some time now. If Congress and the administration need a reason to act, our numbers on costs can provide it.

Currently, some 15 percent of Americans 71 or older have dementia. That is about 3.8 million people; a large number to be sure, but one that will pale by comparison to the 9.1 million expected to be suffering from the disease by 2040.

Our report, The Monetary Costs of Dementia in the United States, estimated that in 2010 Americans spent $109 billion for dementia care purchased in the market place, like nursing home stays. Factoring in the costs of informal care—provided by family members or others outside of institutional settings—the total cost of caring for dementia patients grew to between $159 billion and $215 billion.

As the U.S. population ages in the coming decades, we can expect these costs to continue to escalate. Even if we assume that dementia’s prevalence stays at the current rate and the cost of care per person does not go up, our research showed that by 2040 total costs will have soared to between $379 billion and $511 billion as measured in today’s prices.

We estimated that the average cost per case in 2010 was between $41,000 and $56,000, but this average conceals a great deal of variation from family to family.  A large majority of Americans will not face large costs for dementia care. Many patients will have their care covered by Medicaid or private long-term care insurance, or their stays will be short and relatively affordable, or for some other reason they will avoid serious hardship.

Yet, a minority of families will face financially devastating costs because of very long nursing home stays.   This calls for an insurance-style solution, one in which the costs of long-term care could be spread across the entire population rather than being concentrated on the unlucky few.

Insurance companies are probably not going to step into the void because the costs associated with these extreme cases are quite uncertain.  But the federal government could take it on and, in fact, has crafted similar solutions in the past.

For example, in 2006, Medicare Part D was partly enacted to protect seniors from the high out-of-pocket costs of expensive medicines such as exotic perscription drugs for cancer and other diseases. The program was designed to help all seniors, but especially those with prescription drug bills large enough to impoverish them.

As recently as 2010, the federal government sought to create a long-term care safety net for the aging population.  The Community Living Assistance Services and Support Act, the CLASS Act, was enacted as part of President Obama’s health care reform package.  The CLASS Act was supposed to do something for seniors by setting up a self-funded and voluntary long-term care insurance program. But, last year, the administration determined that implementing the law would be too expensive and it was abandoned.

It is time for the government in partnership with industry to return to the drawing board to craft a plan that will provide protection for the more than 9 million people who will need care for dementia by 2040. Until it does, too many Americans will be forced to spend themselves into poverty.

Michael D. Hurd is a senior principal researcher at the RAND Corporation, where he directs the RAND Center for the Study of Aging.

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Robert FerrellRoger MadisonLisa JacksonJohn Ballardspike Recent comment authors
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Robert Ferrell
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Robert Ferrell

Dementia together with other cognitive conditions will heavily rely on long-term care services that are known to be expensive. I’ve heard the CLASS Act but it was too ambitious and expensive for people who will need financial help. It was scrapped before it even began and nowadays people are encouraged to purchase insurance since government programs only provide limited coverage. Long-term care insurance is one of the options when paying for assisted living facilities and nursing homes. It is expensive in nature but experts reveal that comparing long term care insurance quotes from websites such as http://freeltcquotes.com/ and https://www.aaltci.org/ can… Read more »

John Ballard
Guest

Nice try, Mr. Ferrell, but as I’m sure you already know (being associated with the insurance industry) that most Americans have no “nest egg.” Old-fashioned pensions are now obsolete and the ones that remain are on the endangered species list. Employee-funded arrangements are available but most are opt-in, not automatic — and again, most working people don’t earn enough to accumulate enough during a working lifetime to supplement a meager Social Security stipend with more than pocket change. Long-term care insurance is a great idea for the carriage trade, along with cosmetic surgery, second homes and boarding academies for the… Read more »

Roger Madison
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Roger Madison

There are federal programs that cover care for dementia but it’s very limited and you need a private insurance for this. But it depends on your insurance underwriting whether your insurance can provide coverage for this type of condition. Or you can simply pay for this straight from your pocket. It’s really expensive to take care of someone who has this condition but with proper and early planning, the patient can receive the proper care he needs. In order to do so, people should plan for long term care early through requesting for ltc quotes. If you want free non-obligation… Read more »

John Ballard
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After ten years in senior care (non-medical) I have yet to see dementia regarded as a primary medical issue. Demented people can be found from one end of the health spectrum to the other. At one end are the advanced cases of Alzheimer’s who can no longer ambulate or feed themselves. At the other end are those who are healthy as a horse, sometimes into their nineties, eating, wandering, talking incoherently, sometimes combative, showing no sign of sickness other than being crazy and in need of constant monitoring. Between these extremes is a bewildering array of subjects, many of whom… Read more »

spike
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spike

It’s funny because when I worked in carve-out Managed Behavioral Health, “Who will pay for Dementia?” was one of the most critical questions in negotiations between the Managed Behavioral Health Organization (MBHO) and the Medical Insurance provider. Dementia is a physical illness that manifests itself behaviorally, so both sides feel that the other should pay. With every admission costing tens of thousands of dollars, a single dementia admit could blow an MBHO’s entire clinical budget for a month. So aside from the caregiver costs, the healthcare system itself can’t or won’t decide “who will pay for the cost of dementia?”

Dr. Rick Lippin
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Dr. Rick Lippin

Janice Lynch Schuster-

Thanks for recognizing the magnitude of this problem and for proposing a bold action plan.(National Caregivers Corp)

Part of the inability to deal with coming major crises is that they tend to overwhelm many planners. There is a neuroscience phrase called “bounded rationality” which is actually said to be neuroprotective in that it prevents our individual brains from becoming overwhelmed.

Unfortunately however this very mechanism prevents us from effectively dealing with very real impending crises like this one.

Dr. Rick Lippin
Southampton,Pa

Janice Lynch Schuster
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I appreciate Dr. Hurd’s post, which resonates, for me, with recent stories I’ve seen in the news. The Washington Post ran an article the other day about our collective failure to address the multi-billion dollar problems we face because of a crumbling infrastructure (roads, water supplies, and so on). We seem unable to contemplate the long-term consequences of inaction, and drive merrily along, hoping things will somehow work out in the end. We see the same forces at play in Congress’ recent response to the effects of the sequestration on air transportation–lawmakers responded almost overnight to that problem. In the… Read more »

Dr. Rick Lippin
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Dr. Rick Lippin

Thanks!

You are correct. We need to plan today before the crisis grows larger.

But we are generally in denial. Unfortunately we are a reactive culture.

Dr. Rick Lippin
Southampton,Pa

Lisa Jackson
Guest

Hi Dr. Rick, I am also agree with you that its must to plan it by today for a safe future.