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posted on 03 April 2016

Dementia Takes Large And Growing Economic Toll

from the Atlanta Fed

-- this post authored by Charles Davidson

Dementia directly costs the U.S. economy upwards of $100 billion a year, more than cancer or heart disease. Add the cost of "informal care," including earnings people forgo to look after suffering relatives, and the overall cost was an estimated $159 billion to $215 billion in 2010, according to research by Michael Hurd, an economist and director of the RAND Corporation's Center for the Study of Aging.

Dementia is strongly age-related, so as the country's population gets older, more and more people will develop the disease. Consequently, annual costs to the economy could exceed $500 billion by 2040, Hurd and other economists at RAND predict. Hurd was lead author of a groundbreaking 2013 study on the monetary cost of dementia in the United States. He defines dementia as a "serious loss of cognitive ability in a previously unimpaired person, beyond what might be expected from normal aging, leading to disability."

Dementia is a major driver of health care costs not just in the United States but throughout the developed world, according to Sube Banerjee, director of the Centre for Dementia Studies at the University of Sussex in the United Kingdom. "Dementia is the highest-ticket health and social care item that we have, making up 60 percent of long-term care spending according to some estimates," Banerjee wrote in the November 2012 edition ofArchives of Medical Research.

Incidence of dementia rises with age

In the United States, dementia afflicts about 10 percent of people 75 to 79 years old, 20 percent of 80- to 84-year-olds, 35 percent of those aged 85 to 89, and more than 50 percent of people 90 and older, Hurd's research shows. By 2050, the portion of the U.S. population 85 and older will rise from 2 percent to 5 percent, according to the U.S. Census Bureau. The share of Americans 65 and older is projected to climb from 15 percent now to nearly 25 percent by 2060.

So if the rates of developing dementia hold steady, the ranks of sufferers will grow significantly.

Hurd wrote the 2013 paper along with four other economists and scientists. They arrived at a monetary cost of dementia that includes out-of-pocket spending by households, Medicare and Medicaid spending, and private insurance expenditures. Most dementia costs go toward institutional and home-based long-term care, and not medical services, as dementia sufferers typically require round-the-clock attention, Hurd said during an October 2015 presentation at the Federal Reserve Bank of Atlanta.

Hurd and his collaborators pegged the total, direct monetary cost of dementia at about $109 billion for the year 2010. Add the estimated costs for informal caregivers' time - or, alternatively, the cost to replace that time with hours of formal care in the marketplace - and the estimated 2010 cost for dementia totaled $159 billion to $215 billion, Hurd and his collaborators calculated. By 2020, the direct monetary cost will rise to $129 billion, while the wider cost will reach roughly $189 billion to $255 billion.

As much as 84 percent of dementia-related costs are attributable to long-term services and support, much of which is supplied by relatives and friends of dementia sufferers, according to an October 2015 RAND study. Overall, informal caregivers, mainly relatives and mostly daughters, provided 83 percent of the hours of care for the elderly. The percentage of informal care hours was a little lower for adults who likely had dementia, the RAND researchers found.

"Short of major technological breakthroughs, the need for care is only going to rise in the future as the population grows older," Hurd and his colleagues wrote in the October 2015 issue of the journal Health Affairs. "Future efforts to reform the U.S. system of long-term services and supports should include a focus on policies to supplement and support informal caregivers."

The need to care for dementia patients will contribute to the expected dramatic growth in demand for personal care and home health aides. The U.S. Bureau of Labor Statistics (BLS) projects that over the next decade, there will be more new jobs for personal care aides than for any occupation in the economy. A similar occupation, home health aide, is projected to add the third most jobs. "In both occupations," the BLS reports, "aides assist people, primarily the elderly, living in their own homes or in large care communities."Watch a video of Hurd discussing his work.


About the Author

photo of Charles Davidson

Charles Davidson

Staff writer for Economy Matters

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