Would it surprise you to learn that more than 11 million people in the U.S. are providing unpaid care for loved ones and friends suffering from dementia? That’s more than the population of New York City and Chicago combined. What’s more, while the estimated value of that care exceeds $346 billion annually, these caregivers – many of whom deal with chronic burnout and physical strain – see none of it. The care they provide, while priceless, is unpaid.
In a companion article on this week’s Blog, we’re taking a look at the projected rise in dementia cases as a warning to all of us that we need to be better prepared to plan for our care needs should that dreaded affliction strike us. Meanwhile, in this article, we’re considering a related story from NextAvenue in which financial writer Richard Eisenberg explores the potentially devastating economic cost of dementia, not only to the sufferer but also to the caregiver.
The message: prior planning is essential to prevent a financial disaster that will compound the emotional pain of dementia. Let’s see what Eisenberg recommends. (For more on the cost of dementia, you can also check out this related Blog article from a few weeks back.)
Dementia Can Drain Finances, Especially with Late Diagnosis
“Dementia is among the most expensive conditions for the person with dementia and their family members.” Eisenberg begins his article with these alarming words from Tsai-Chin Cho of the University of Michigan School of Public Health, spoken at a large annual gerontology conference in Seattle in 2024.
“Roughly 1 in 10 Americans aged 65 and older has dementia; another 22 percent have mild cognitive impairment, according to Columbia University researchers,” Eisenberg writes. “Although just 3 percent of people aged 65 to 69 have dementia, 35 percent of those 90 and over do.” In other words, the risk skyrockets with longevity.
Statistics Understate the Financial Pain of Caregiving
According to numbers provided by the Alzheimer’s Association, Medicare beneficiaries with Alzheimer’s (or other dementias) pay an average annual out-of-pocket cost of $10,289 for health care and long-term care services that are not covered by Medicare, Medicaid, and private insurance. However, that’s definitely not the whole picture.
Eisenberg adds, “But that figure may understate reality. The Alzheimer’s Association also says out-of-pocket costs and informal caregiving (typically from family members) add up to $240,046 in the last seven years of life of a family member with dementia, roughly double the amount for those without dementia.” That’s an average fiscal impact of $35,000 per year.
Caregivers Experience Far Greater Financial Strain
At the 2024 Gerontological Society of America conference in Seattle—the same one in which Tsai-Chin Cho spoke the opening quote—researchers from the USC Leonard Davis School of Gerontology reported that caregivers of people aged 50 and older with Alzheimer’s were 50 percent more likely to experience financial strain than caregivers of those without Alzheimer’s. There’s a real concern among experts that too many Americans don’t realize the financial toll this disease can take.
“I believe most people are not thinking they might have this [financial] situation,” said HwaJung Choi, an economist and professor at the University of Michigan School of Public Health who co-authored the JAMA Internal Medicine article, “Changes in Care Use and Financial Status Associated With Dementia in Older Adults.”
The fact is, Choi added, most Americans can’t afford the cost of long-term care for dementia. A study published in the journal of JAMDA in 2024 reported that people aged 70 and older with dementia “were at greater risk of facing catastrophic out-of-pocket expenses for long-term care than those without dementia.”
Dementia Doubles Out-of-Pocket Medical Costs
Choi’s article calls the financial burden of dementia on patients and families “substantial”, and goes on to compare the annual out-of-pocket medical costs and wealth for older Americans with dementia versus those without it.
“For those who did not have dementia, we didn’t see much change at all for out-of-pocket medical costs,” Choi says. “But for the dementia group, it almost doubled over two years, starting at $4,000 at the onset of dementia and continuing to increase to $10,000 over the four years of follow-up.”
Over eight years, people with dementia spent $33,000 in out-of-pocket medical costs on average. This is roughly twice the amount for people without dementia.
Dementia Triggers a Significant Loss of Resources
“Similarly,” Eisenberg writes, “those with dementia saw dramatic wealth drops over eight years — from roughly $80,000 to $30,000. During that time, the median wealth for the older adults in the study who didn’t have dementia started at about $80,000 and didn’t change much.”
Choi says that the most likely reason for the wealth decline among people with dementia is the cost of nursing home care or residential care. Within two years after the study began, a “striking” 30 percent of the people with dementia—with no spouse or adult child—were in nursing facilities.
By comparison, the figure was closer to 5 percent for those with a non-disabled spouse or adult child. For people with dementia, the impact of having a family caregiver on financial well-being, Choi says, “is really, really huge.”
Even Before Diagnosis, Dementia Drains a Family’s Finances
The drain on a family’s finances can begin long before diagnosis. University of Washington Professor of Health Economics Jing Li and her colleagues found conspicuous declines in wealth six to eight years before a person’s dementia diagnosis was solidified. “Our work highlights the possibility that financial decisions can very much be impacted by the disease course even before the full onset of dementia,” Li says.
Eisenberg explains, “Li’s research team reviewed U.S. Health and Retirement Study data for people 50 and older and their spouses from 1998 through 2018 with probable dementia and those without dementia. They discovered that although median household net worth was similar between the groups eight years before probable dementia (roughly $215,000), its decline accelerated in the years shortly before dementia onset ($104,360).”
Difficulty in Managing Money: a Side Effect of Dementia
Experts blame the significant financial status differences between people with dementia and people without on “deteriorating financial capacity” associated with cognitive decline, which includes a susceptibility to fraud.
Eisenberg writes, “Li and colleagues have found that among people 50 and older managing their finances, 57 percent of those with dementia and 15 percent with undiagnosed cognitive impairments reported difficulty doing so. By contrast, just 4 percent of those without cognitive impairment had trouble managing money.”
Li and others conducted another study in which they discovered that in the six years before people were diagnosed with dementia, they had higher total health costs than those without dementia. “An examination of undiagnosed memory disorders by the Federal Reserve Bank of New York said years prior to the eventual diagnoses, the average credit scores began to weaken and payment delinquencies started to increase,” Eisenberg adds.
The Critical Importance of Early Diagnosis
While cognitive impairment is a growing problem for individuals and families, a very high percentage are not properly diagnosed, especially at early stages. A 2021 study found that roughly 75 percent of people with cognitive impairment consistent with dementia did not have any formal medical diagnosis of Alzheimer’s or dementia.
This failure to obtain an accurate medical evaluation compounds the financial impact of cognitive impairment. Researchers say that earlier diagnoses of dementia could make a key difference in preventing wealth loss. Li and her team are looking into the reasons why some sufferers of cognitive impairments get earlier diagnoses than others.
Their initial theory was that people who get an earlier diagnosis are more conscientious about their health. However, they’ve since discovered that the key difference is that those who receive early diagnoses of dementia don’t live alone. “They’re more likely to have someone in their lives who would notice those symptoms early on and maybe nudge them to get a diagnosis,” Li says. This should be a wake-up call for those of us with loved ones aging .
Preserving Finances for You and Your Loved Ones
Eisenberg provides the following research-backed steps to help you or your loved one preserve your finances when faced with dementia. (For brevity we have provided these slightly abridged; please visit the original article for more details.)
Consider long-term care insurance. “Don’t wait until your 70s or older to shop for a policy; you might be denied coverage or charged steep premiums,” Eisenberg writes.
Communicate about finances. Talk early and often with loved ones about the details of your financial health so that any concerns or potential fraud can be caught early. “It’s very important for family members to allocate their roles and work together,” says Choi.
Give power of attorney to adult children. This step should be taken before dementia enters the picture, so that adult children can help manage their parent’s money in the event of decline. “Delaying this conversation until after the parent has dementia — diagnosed or not — could be too late to get the signature,” Eisenberg writes.
Take advantage of Medicare tools. If you’ve had Medicare Part B for at least 12 months, Eisenberg suggests getting a free annual wellness check from your doctor. “I think an annual cognitive assessment is something that’s very important,” Li says.
Brokerage clients should fill out “trusted contact” forms from their advisors. Eisenberg explains, “These documents let a client provide the name and contact information of someone the advisor can talk with if the pro is concerned about potential financial fraud or exploitation or suspects the client is suffering from diminished capacity.”
Flag warning signs with your bank. In partnership with AARP, banks are increasingly training their staff to recognize signs of financial abuse in an effort to reduce it. If you suspect your parent may have cognitive impairment, let your banker know so they can keep an eye out for potential problems.
(originally reported at www.nextavenue.org)