We frequently discuss the high cost of long-term care, but dementia care can be especially burdensome for families. A recent study examined dementia-related expenses and found that these costs often consume a large portion of a person’s monthly income and rapidly erode retirement savings.
A first-of-its-kind look at dementia care costs
Researchers at the University of Washington School of Pharmacy, with collaborators at Georgia State University School of Public Health and the University of California–San Francisco, analyzed data from the National Health and Aging Trends Study (NHATS). Since 2011, NHATS has gathered yearly, in-person data from a nationally representative sample of Medicare beneficiaries aged 65 and older, documenting detailed aspects of aging and healthcare use.
Using NHATS, the research team focused on a representative sample of 4,505 Americans aged 70 and older. They examined monthly out-of-pocket long-term care expenses paid to facilities and helpers, total monthly out-of-pocket long-term care costs, and those expenses as a percentage of monthly income. The analysis compared costs by dementia status and residential setting (community, residential facility, and nursing home).
This is believed to be the first U.S. study to analyze and compare out-of-pocket long-term care expenses by dementia status and care setting.
Findings on the cost of dementia care
Among the 4,505 individuals aged 70 and older in the sample, 1,750 (38.8%) had possible or probable dementia, while 2,755 (61.2%) did not. Dementia prevalence increases with age, and as the baby boomer generation ages, the total number of Americans living with dementia is expected to grow.
The researchers reported median monthly out-of-pocket long-term care costs for people with dementia by setting. For those with dementia in nursing homes, the median monthly out-of-pocket cost was $1,465. In non-nursing residential facilities—often assisted living communities—the median monthly out-of-pocket cost was $2,925. For people with dementia living in the community, the median monthly out-of-pocket cost was $260.
Although median costs were similar for people without dementia within each setting, the distribution shows much higher costs for many individuals with dementia. The study found that people with dementia face a substantially higher risk of catastrophic out-of-pocket long-term care expenses compared with those without dementia.
For example, among residents of non-nursing residential care facilities, the 75th percentile of monthly out-of-pocket spending for people with dementia was $4,566, versus $3,694 for those without dementia. In nursing homes, the 75th percentile for people with dementia reached $7,500 per month out-of-pocket, compared with $3,100 for residents without dementia.
Care costs as a percentage of income
Interpreting costs relative to income highlights the financial strain dementia care can create. The study found that the median person with dementia living in a non-nursing residential facility was spending 97% of their monthly income on long-term care expenses. Those with dementia in nursing homes spent nearly 83% of monthly income on care.
In short, people with dementia in residential facilities often spend nearly all of their monthly income on care, quickly depleting retirement savings and forcing difficult financial decisions for patients and their families.
Don’t forget the cost of unpaid dementia care
While the average monthly out-of-pocket cost for community-dwelling individuals with dementia was only $260, this number likely underestimates the true economic burden. Much care in the community is provided by unpaid family members and friends, and unpaid care is not truly free.
Unpaid caregivers frequently experience declines in their own health, including anxiety, depression, and physical strain related to caregiving responsibilities. Caring for someone with dementia can be particularly taxing emotionally, increasing the caregiver’s mental and physical burden.
Family caregivers also often bear financial costs: paying out-of-pocket for care-related expenses, losing wages due to reduced work hours or missed shifts, and depleting their own retirement savings. Some caregivers are forced to retire early or leave the workforce entirely to provide full-time care.
An ever-growing challenge
U.S. Census data show that approximately 10,000 baby boomers turn 65 each day, and by 2030 all baby boomers will be 65 or older. As this population ages, more Americans will experience dementia or other cognitive impairments, increasing demand for dementia care and intensifying the financial challenges families face.
This University of Washington study illustrates how many people with dementia in residential facilities or nursing homes are spending the majority of their monthly income on out-of-pocket care. If demand for services grows while supply remains limited or shrinks, some families could face severe financial hardship.
It is also important to remember that Medicare often does not cover the type of nonmedical supportive services people with dementia require every day. Because these services are typically nonmedical, Medicare coverage can be limited, leaving families to pay out-of-pocket for essential care.
To address these challenges, society must explore policies and programs that enable people with dementia to live safely outside costly residential facilities when possible. Solutions could include targeted financial support from public programs and expanded community-based services that provide practical assistance to both people living with dementia and unpaid caregivers.
If you have a loved one with dementia, the Alzheimer’s Association offers extensive caregiving information and resources, including educational programs, support groups, guidance on what to expect, safety considerations, and options for paid in-home care.