Expert Discusses High Economic Costs of Dementia Transcript

ECONversations: The Monetary Costs of Dementia
Public Affairs Forum
October 21, 2015
An interview with Michael Hurd, Director, RAND Center for the Study of Aging

Dementia is a syndrome of conditions coming from various types. It's a loss of cognitive abilities that is associated with old age. And in fact the prevalence of dementia—that is, the fraction of the population that is demented—approximately doubles beginning in the age band of 70 to 74. At that age band, maybe 2.5 percent of the population would be classified as being demented. At age 75 to 79, that doubles to 5 percent. Eighty to 84 would double to 10 percent—and you can see how that progression goes. So by the time people are in their 90s, the fraction of the population demented, or percent, might be 40 to 45 percent. So, it's strongly age-related.

The causes of dementia are many. The most prominent or common cause is Alzheimer's disease. It's thought that probably two-thirds to 70 percent of people with dementia have Alzheimer's disease. Vascular dementia—that is, dementia that results from strokes—frontal temporal dementia is another type, Lewy body dementia, Parkinsonian dementia, and so on—they all lead to a loss of cognitive functioning as well as other conditions that make it impossible for people to operate in their normal way. As dementia progresses, as it goes on, it makes it impossible for people to live independently. So most people end up being in nursing homes who are suffering from dementia.

The main costs associated with dementia, in fact, are simple, caring costs. Demented people need supervision 24 hours a day, seven days a week, of some kind or another. That requires constant care, and if a family is not able to provide that care, then that care has to be provided through the marketplace. The most common form of providing that care is in long-term care facilities, more commonly known as nursing homes. Nursing homes are expensive. The average cost for a year's stay in a nursing home in the United States is a number like $85,000 a year. Who pays is a complex issue, but in some cases it will be out-of-pocket spending by the individual or his or her family. Often it's paid for through Medicaid, which is a form of insurance that comes from the federal government and from the states, and in some cases—not too many, but in some cases—from long-term care insurance.

Eighty to 85 percent of the additional costs associated with dementia come from just caring for people. In our work, we wanted to make an attribution of costs to dementia itself, abstracting from or taking care of or controlling for other costs that the demented person might incur, say through increased use of hospitalizations or other things. Depending upon how you value informal care, which is an important topic here, a number like $55,000 per year could be attributed to dementia, with some range around that depending upon a couple of factors.

We aggregated that number up and found that the costs attributable to actual spending in 2010 for dementia was around $109 billion at the national level. That turns out to be more than the cost attributable to either heart disease or cancer, which are the two leading expenditure categories following dementia. This was a new finding in our paper and has led to some, I think, reorientation of spending on research in the health care area.

Just caring for somebody is the most important cost component. There are basically two ways of caring for somebody. One is through the marketplace—that is, either the demented person is in a nursing home and somebody pays the nursing home to take care of that person. There's also in-home care, where somebody who works for a private agency comes to the home and cares for the demented person, and there's a price attached to that. But it turns out that formal in-home care is not a very important cost component. The most important component of care in the home is informal care. Examples of informal care would be a dementing husband cared for by his wife. She's with him 24/7 unless she can find a replacement at times. Or it could be the 50-year-old daughter of an 80-year-old dementing mother caring for her mother. Sons do not often provide informal care—and, as a side note, they don't often provide money, either. So, it's better to have daughters in this perspective.

So this is a very difficult task to measure how to put a value on informal care. Our approach was to ask, "How much does it cost the economy to provide the informal care?" So let's take some examples. Let's go back to the 80-year-old wife taking care of her 83-year-old husband. If she were not taking care of him, the chances are she would not be providing labor to the formal economy. Very few 80-year-old women are providing labor to the formal economy, so the forgone increment to national product of her providing care to her dementing husband is pretty much zero. Contrast that with the 50-year-old daughter taking care of her dementing mother. She may have had to forgo a full-time job to do that. If it's a $50,000-a-year job, then she's taken out of the economy $50,000 worth of labor, and we want to count that time as being worth $50,000. So we do that by, in our data set, matching the caregivers whom we know in our data set to observed people who are in the labor force who are earning incomes in the labor force, and attribute to the caregivers a similar amount of income.

It's been very interesting. We published this paper in the New England Journal of Medicine in 2013, and it was the front page story in the New York Times the day we published, and it's attracted a lot of attention. I gave Senate testimony several times about this. And I would say it has helped change the research priorities in the National Institutes of Health. I talked to somebody who is on the board of directors at the Alzheimer's Association, and she said, "Prior to your article, we would go to Washington and we would talk to a congressman or the staff of a congressman and we would talk about the pain that comes to people from having somebody in their family who is suffering from Alzheimer's. But after your article," she continued, "we go to Washington and we talk about costs, and suddenly Congress and staff are interested in what we have to say." And so she said it's changed the whole tenor of the discussion in Washington about research funding priorities. And indeed, the president's brain initiative of $100 million came about shortly...around that time.

So I think it's contributed to an awareness that dementia is a serious problem even today, but it's going to become a much more serious problem. For example, the fraction of people over age 85 is expected to more than double going to 2040, and as a society we need to be spending and investing funds to help find a cure for dementia before these costs escalate in the way that we project them to be escalating.