Costs of Dementia to Medicare

By July 31, 2019 Commentary

I am getting pretty old and I can guarantee you that the scariest thing that can happen to your health is to literally lose your mind; to have Alzheimer’s or a similar dementia.  If your mind is sound, you can cope with most other health issues, even a terminal illness.  And as the population ages, incidence and prevalence of dementia is rising.  This is typically a chronic disease, lasting many years and incurring substantial health spending.  An article in Health Services Research details how much Medicare is spending on dementias.    (HSR Article)   Somewhere between four to five million older adults have a dementia severe enough to interfere with activities of daily living.  Previous research gave widely varying estimates for the annual cost of treating the disease.  These authors used Medicare claims and other data from the Health and Retirement Survey to estimate the incremental cost of dementia to the Medicare fee-for-service program in the first five years after diagnosis.  They attempted to disentangle the costs effects of dementia in regard to length of life and the effects on the intensity of treatment.  Respondents to the HRS who did not have a dementia diagnosis were used as controls to measure against those who did.  A little over 4000 dementia patients ended up being included in the analysis and about 10,000 control beneficiaries.

Patients were slightly over 80 at time of diagnosis and two-thirds were female.  People who ended up with a dementia diagnosis had more comorbidities before diagnosis and their average annual cost in the year before diagnosis was over $17,000 versus $10,000 for the controls.  In the five years after diagnosis, dementia beneficiaries averaged total spending of $71,917 versus $56,214 for the non-dementia ones, or about $15,700 more. Greater intensity of Medicare services received drives the difference and almost half the five-year incremental cost is incurred in the first year after diagnosis and by year five the cost difference is almost zero.  Most of the additional cost was also due to hospital inpatient services.  Dementia is therefore likely costing Medicare several billion additional dollars every year.   It should be noted that the cost of prescription drugs was generally not included in the analysis.  While there are not highly effective medications for dementias, these patients are prescribed a large number of drugs for the condition, including anti-psychotics and other mental health compounds.  Including those could raise treatment costs significantly.  It should also be noted that in addition to Medicare, older adults with severe dementias may need a special living situation, which is often paid by Medicaid, so the costs to the public are larger than just Medicare.

Kevin Roche

Author Kevin Roche

The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry through Roche Consulting, LLC. Mr. Roche is available to assist health care companies through consulting arrangements and may be reached at khroche@healthy-skeptic.com.

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