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When we think about the cost of dementia, it’s often framed as a financial burden on the health system, such as Medicare expenditures. However, a new study by researchers at The University of Michigan found that a dementia diagnosis can significantly damage a person’s net worth and personal spending — costs which researchers say should be incorporated into analyses of the broader health care outcomes and financial consequences of this condition.
The cost of caring for someone with dementia generally is incremental, but can quickly add up. People with dementia spent more than double on out-of-pocket health care costs, saw a more than 60% drop in net worth over the first eight years of diagnosis, required more hours of care from family and friends, and entered nursing homes at nearly five times the rate of other adults at a comparable age and health status but without dementia, researchers found. And people with dementia living at home or in the community were more likely to use paid home care services, which is generally not covered by traditional Medicare and may only be partially covered by some Medicare Advantage plans.
Alzheimer’s disease and related dementias (ADRD) are among the most expensive health conditions, according to the Alzheimer’s Association — costing more than $387,000 (in 2021 dollars) in the last five years of life for a person with dementia. Other research has revealed that the out-of- pocket costs averaged $38,540 more (in 2015 dollars) to care for those living with dementia versus without from age 65 to death. This is primarily due to the cost of long-term residential care. In 2022 dollars, based on a 23.3% cumulative inflation rate, the difference is $55,187.
Journalists can use the information in this study to investigate whether state or local programs are available to help relieve the financial and emotional toll on families and those living with dementia. Some states provide respite, in-home or adult day services, for example, while others actually pay caregivers, if the care recipient meets certain criteria.
The incremental changes associated with the long-term care and financial burden of people with dementia and their families are substantial, according to the researchers from The University of Michigan. Another sign of financial distress: Enrollment in Medicaid, the safety-net health care program for people living in poverty, nearly doubled for people with dementia in the first eight years after diagnosis, researchers noted. The rate of enrollment stayed flat for their peers.
Unpaid caregiving from family and others is the most striking and persistent care use difference, according to HwaJung Choi, Ph.D., the study’s lead author and a health economist and research associate professor in the University of Michigan Medical School’s Department of Internal Medicine. On average, caregivers spent 45 hours per month caring for people with dementia, compared to 13 hours for those without it, after two years. That difference remained consistent across eight years.
The study method
Researchers examined broad outcomes such as care and financial status among a cohort of 4,378 older adults using data from the Health and Retirement Study — a long-term analysis based on interviews and health exams — to reveal trends that previous studies using Medicare data alone could not. At baseline (the time before a dementia diagnosis), the median of study participants’ wealth was approximately $79,000 when all assets and debts were counted. Overall, the wealth of the peer group without dementia was about the same.
Both groups had annual out-of-pocket spending for medical expenses such as co-pays, deductibles, over-the-counter purchases and home care of about $4,000 at baseline.
By the end of two years, people with dementia saw their median wealth drop to $58,800, and their out-of-pocket costs double to around $8,000. Their peers saw neither of these impacts. After eight years, people with dementia had spent nearly twice as much as their peers for health expenses and their median wealth dropped from $79,339 to $30,490; their peers saw no significant drop.
The availability of family support was a critical factor in moving to nursing home residence, both at baseline and by the end of eight years after dementia onset. Nursing home residence was half as common among those who either lived with a non-disabled spouse when they were first diagnosed, or who had both a spouse and a child living with them.
To help address the financial and emotional burdens of dementia care, the Centers for Medicare and Medicaid launched a new pilot program called “Guiding an Improved Dementia Experience” (GUIDE) in July 2023 to support people diagnosed with dementia and their families to help with care coordination, respite care and caregiver education and support.
The GUIDE Model will offer a standard approach to care, including 24/7 access to a support line. The goal is to allow people living with dementia to remain safely in their homes for longer by preventing or delaying nursing home placement and improve quality of life for both people living with dementia and their unpaid caregivers. The model also incorporates policies to enhance health equity by ensuring underserved communities have equal access to the intervention.