The Financial Cost of Dementia

Most of the costs of treating Alzheimer’s disease are not covered by Medicare.

Posted Oct 10, 2013

Many of us know the emotional toll that Alzheimer's disease and other dementing illnesses have on patients and families, but how much do we know about the financial burden? A recent report in the New England Journal of Medicine examined the cost of taking care of persons with dementias. Not only are the costs dramatic, but the nature of these costs and who pays the price are sobering.

In 2010 dollars, the cost associated with dementia treatment and care is estimated to be between $42,000 and $56,000 per person per year. Because about 15% of persons 70 and older have dementia, the total cost in the US is an astounding $157 billion to $215 billion per year. Of this total, Medicare covers only about $11 billion.

Why so expensive? Over 75% of the cost per individual involves either nursing home or home care costs. Overall, nursing home care accounts for about 25% of the total cost. About 50% of the cost involves home care. This number is derived from either the actual cost of paying for formal home-based care or the cost of lost wages for family members or friends to provide care for a demented person still living at home. We suspect that many are personally aware of the financial and emotional costs of providing care to a parent or grandparent. Dementia care is one side of the “sandwich” of the so-called “sandwich generation.”

Medicare-related costs make up about $2,700 of the approximately $50,000 annual cost. Why so low? Medicare-covered costs involve direct medical services. Hospital and physician bills resulting from dementia are a relatively small percent of the total cost of taking care of persons with dementia. Therefore, although Medicare and/or other medical insurance cover the majority of hospital and doctor charges, these bills make up only 5-6% of the total costs.

Most nursing home bills are not covered by Medicare or other third party medical insurance policies. If a person requires long term nursing home care, the costs (about $80,000 per year) are paid from personal funds unless a person had purchased a very specific type of insurance called long-term care insurance. Once personal savings are fully depleted (i.e., all of a person’s savings are gone), Medicaid helps pay nursing home costs. However, it may be difficult to find a Medicaid-subsidized bed in a high quality nursing home.

So, what can we do about this? The good news is that a lot of progress is being made in understanding the pathophysiology and natural history of dementias. It is now known that pathological changes in the brain associated with Alzheimer's dementia start at least 15 years prior to the onset of noticeable symptoms. Thus, the possibility of delaying the onset of clinical Alzheimer's disease is a reasonable goal. Tests are becoming available that should allow us to determine who is likely to develop this illness years down the road. With the ability to detect individuals at high risk, research clinicians are already studying medications that might prevent the abnormal brain processes that cause disease progression. The bad news is that therapeutic efforts to date have not been highly successful, and research funding is not keeping up with the potential for clinically significant advances. We would argue that investments in preventing Alzheimer’s disease and other dementias should be a very high national priority. We would further argue that there are staggering costs associated with other neuropsychiatric illnesses, including substance abuse, schizophrenia, and depression. In fact, combined costs of these illnesses are perhaps double the costs associated with Alzheimer’s disease, yet these are even more underfunded areas of research. Naturally, as academic physicians, we may be biased. What do you think?

This post was written by Eugene Rubin MD, PhD and Charles Zorumski MD

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