The Cost of Dementia and the Longevity Dividend

by Reihan Salam

Shirley Wang’s report on the economist cost of dementia, which draws heavily on a new analysis by the RAND Corporation, includes a number of observations, e.g.:

(1) the direct medical costs of treating dementia ($109 billion) in 2010 greatly exceeded the direct medical costs of treating cancer ($72 billion), and are just ahead of the cost of treating heart disease ($102 billion);

(2) and Alzheimer’s disease afflicts 5.4 million Americans, a total that is expected to grow as the U.S. population ages, as the prevalence of dementia by age cohort doubles every five years from the early 70s on.

(3) The RAND report offers a rough assessment of the cost of both formal care, provided by home health agencies, the informal care provided by relatives and friends. Informal care was measured both through the lens of replacement cost, i.e., the cost of obtaining the same care from a health home health agency, and foregone wages, i.e., the the value of the hours caregivers devote to informal care that might otherwise have been spent in the workforce. Factoring in the cost of informal care increases the total monetary cost of dementia from $102 billion to somewhere between $159 billion and $215 billion.

Assuming we are unable to delay the onset of dementia and the cost of formal care and informal care continue to rise as expected, the RAND report estimates that the cost of treating dementia on a per adult basis will increase by 79 percent between now and 2040. 

The most attractive way to contain these costs is to work towards an extension of disease-free lifespan by, among other things, devoting more resources to “to understanding the biology of aging and how it predisposes us to a suite of costly diseases and disorders expressed at later ages,” as S. Jay Olshansky, Daniel Perry, Richard A. Miller, and Robert N. Butler argued in their 2005 article “In Pursuit of the Longevity Dividend.” This is an expenditure of taxpayer resources that has the potential of yielding substantial savings in the future, and as such it merits serious consideration.

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.