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.

9 replies »

  1. 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 kids. But for the rest of us, it’s like stabling show horses or collecting classic cars — an appealing idea not within reach for most of us. If I were advising people at the carriage trade level my advice would be checking out CCRTs, continuing care retirement communities. They are expensive clubs to join, but that’s the future for members of the economic upper crust.

  2. 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 help consumers find a policy that is affordable and can satisfy their future care needs. Requesting for quotes will allow them to compare one policy to another, benefits, discounts and policy features.

    There are also other payment options available like hyrbrid policies or combination products that allow a policyholder to have both death and long-term care benefit. This is recommended for people who will only need long term care for a short period of time and wish to leave something behind to their beneficiaries once they die.

    Self-insuring is not recommended nowadays because of the inflation rate of long-term care, which is sure to deplete your assets. It’s better to have coverage rather than take the risk of facing the future without coverage and putting your nest egg at risk.

  3. 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 quotes just check this out: http://www.ltcoptions.com/free-long-term-care-quotes/.

  4. 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 need minimal medical attention but constant care for safety and security.

    My point is that dementia in all its forms is not a secondary challenge. It is THE problem, a primary problem, and must be regarded as a primary challenge which, as far as I can tell, is also both progressive and irreversible. The main obstacle I see is denial of that simple reality on the part of insurers, providers and, of course, family members.

    I wish I could suggest a way to get more people to pay attention, but the Overton Window is moving ever so slowly in this case. I am hopeful that as we Boomers become more problematical someone other than the drug companies peddling what thus far is little better than old-fashioned (and now very expensive brand-name) tranquilizers will craft a program to meet the mundane but endless grunt work of taking care of this population.

    I don’t want to sound callous or cynical. But changing disposables, helping people find the dining room or the toilet, and reminding them to take their meds is not rocket science. And it is easy to over-think what is a pretty straightforward and costly social problem.

  5. 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?”

  6. 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

  7. 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 meantime, however, Congress takes no action to address the millions of lives being disrupted by the effects of the sequestration on social services, such as Meals on Wheels.

    We seem most able to respond to problems that affect us directly, or that we perceive as an immediate risk. But we are less inclined to deal with long-term struggles–such as the significant problems we will encounter as millions of people develop Alzheimer’s disease and other dementias, and as their families and friends find themselves overwhelmed and unable to cope.

    We do have the national action plan on Alzheimer’s–but its focus is primarily on cure, which will come too late for many of those now aging. As Dr. Hurd describes it, we will need a much larger response–and likely one that is led by federal agencies and programs. We will need our collective imagination to envision a future in which we can live well, despite increasing illness and disability.

    I myself had proposed that we launch a national Caregiver Corps, modeled on the Peace Corps, that would rely on an intergenerational, cross-cultural response to the challenges that we face. We could recruit people, young and old, to volunteer in their communities to support family caregivers and the organizations that serve them. Along the way, we could encourage intergenerational understanding and communication, and build a workforce better suited to our needs. Such an undertaking would require many organizations, public and private, to join forces–such forces, I think, are what we will need most.

  8. 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