Cost of Dementia Care Can Be an Overwhelming Financial Drain

We often write about the staggering cost of long-term care. However, there is a subcategory of this type of care that can be particularly expensive for families: dementia care. A recent study examined this important topic and found that the cost of dementia care often eats up much of a person’s monthly income and quickly depletes their retirement savings.

A first-of-its-kind look at dementia care costs

In this recent study of dementia care costs, researchers from the University of Washington School of Pharmacy (with assistance from the Georgia State University School of Public Health and the University of California – San Francisco) examined data from the National Health and Aging Trends Study (NHATS).

Since 2011, the NHATS has collected information on a nationally representative group of Medicare beneficiaries ages 65 and older. To do this, NHATS researchers conduct annual, in-person interviews with study participants, gathering detailed information on their aging process.

The University of Washington research team thus used the NHATS data to zero in on a representative sample of 4,505 Americans age 70 and older. Specifically, the team focused on “monthly out-of-pocket long-term care expenses paid to facilities and helpers, total monthly out-of-pocket long-term care expenses and [expenses] as a percentage of monthly income by dementia status and residential status (community, residential facility, and nursing home).”

This is believed to be the first study in the U.S. analyzing and comparing out-of-pocket expenses based on dementia status and care setting.

Findings on the cost of dementia care

The research team found that of the 4,505 people age 70+ in their sample, 1,750 (38.8%) had possible or probable dementia, and 2,755 (61.2%) did not have dementia. There is some nuance that should be applied to this finding since the prevalence of dementia increases with age (see Table 2). But it is also important to keep in mind that as the baby boomers grow older, the total number of Americans with dementia will rise.

Zeroing in on the group with possible or probable dementia, the researchers looked at that group’s cost of care each month. They found that the median monthly out-of-pocket long-term care cost for a person with dementia was $1,465 for those living in a nursing home setting. For those with dementia living in another residential facility setting — often an assisted living community — the median monthly out-of-pocket cost of care was more than double that: $2,925 each month. For those with dementia living in the broader community, their median monthly cost of care was just $260.

The research team noted that these costs are similar to the median out-of-pocket cost of care for persons without dementia by setting. However, bear in mind that these are just median costs; many people are paying much more each month. The study found that those with dementia were at a much higher risk of “facing catastrophic out-of-pocket expenses for long-term care than those without dementia.”

For instance, they found that the 75th percentile value of out-of-pocket costs among those with dementia living in a non–nursing home residential care facility (e.g., assisted living) was $4,566 per month, as compared to $3,694 for those without dementia. For those living in a nursing home setting, the 75th percentile value was a whopping $7,500 per month out-of-pocket for dementia patients, versus $3,100 for those in a nursing home without dementia.

Care costs as a percentage of income

While these dementia care costs likely sound expensive to most everyone, there’s another important way to interpret these figures which gives even more context.

The researchers found that the median adult with dementia living in a non-nursing home residential facility (like an assisted living community) was spending 97% of their monthly income on long-term care expenses. Those with dementia who live in a nursing home were spending nearly 83% of their monthly income on their dementia care costs.

In short: Those with dementia who are living in residential facilities are spending nearly all of their monthly income on their long-term care costs. It’s easy to see how a person’s retirement savings could be rapidly depleted with this level of spending, resulting in some difficult financial decisions for the patient and/or their loved ones.

Don’t forget the cost of unpaid dementia care

It is also crucial to note that while the study found the monthly out-of-pocket cost of dementia care for those living in the broader community averaged just $260, this figure is likely artificially low. One can surmise that much of the care being provided to this group of dementia patients is unpaid — being performed by family members or other loved ones.

As we have often discussed, such unpaid care is rarely truly “free.” Unpaid caregivers often pay a price with their own health, suffering from anxiety and/or depression, as well as other physical ailments tied to the strain and stress of their caregiving responsibilities. And because caring for a loved one with dementia can be especially difficult emotionally, unpaid caregivers can be hit even harder by the mental burden.

And then there is the financial burden many family caregivers take on. Not only do they often spend their own money on the cost of their loved one’s care and other monthly expenses, these caregivers also may be losing out on wages at work, which can also mean lost savings for their own retirement. Some are even forced to quit their job or retire early.

An ever-growing challenge

According to data from the U.S. Census, approximately 10,000 baby boomers reach age 65 every day, and by 2030, they will all be age 65 or older. As this happens, we will see more and more Americans suffering from dementia or other types of cognitive decline. The cost of dementia care and access to it thus will be an increasingly critical issue for our nation to confront.

As we can see from this study out of the University of Washington, many people with dementia who live in a residential facility or nursing home today are depleting their monthly income on their out-of-pocket cost of care. As demand for care services increases in the future, if supply remains the same or shrinks, it could spell financial ruin for some families.

And keep in mind too that Medicare often does not cover the cost of care for people with dementia. Why? Because the type of supportive services dementia patients need on a daily basis are usually non-medical in nature. (Go to Medicare.gov to learn more about what dementia care services are and are not covered.)

With all of these factors in mind, our society must find more and better ways to care for people with dementia. For instance, we must look at policies that can be put in place to enable people with dementia to more easily and safely live outside of a costly residential facility setting. This might include financial aid from federal programs as well as “boots on the ground” assistance from community organizations — offering a variety of support services not only the person with dementia but also to unpaid caregivers.

>> If you have a loved one with dementia, the Alzheimer’s Association has extensive caregiving information and resources that can help. They offer free educational programs and support groups, as well as detailed information on what to expect, safety considerations, paid in-home care options, and more.

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