Why It’s More Critical Than Ever to Support Mental Health and How Insurers Can Help
Editor’s Note: This blog post from The Council for Disability Awareness’ member company, MassMutual, defines how much of a problem Alzheimer’s disease and other forms of dementia are becoming as people live longer; points out how significant the direct and indirect costs of caring for someone with dementia are becoming; and recommends steps for estate planning and preparation that can help mitigate some of the financial challenges.
Out-of-pocket health care costs for people with dementia are significant
We tend to take our cognitive abilities for granted until something threatens them — similar to other aspects of our health and wellbeing. Alzheimer’s disease and other forms of dementia progressively diminish those abilities until we can no longer perform daily tasks.
Long before that point, we may lose our ability to make sound financial decisions. In fact, poor financial decision-making can be one of the first serious signs of dementia, appearing several years before diagnosis.
In addition to the emotional distress the disease causes to its victims and their loved ones, Alzheimer’s can have a serious financial impact. The Alzheimer’s Association estimates that the lifetime cost of dementia, including the cost of unpaid caregiving, is $375,000. Of that, families pay for about $263,000.
The annual out-of-pocket health care costs to support seniors with dementia are more than four times those paid by seniors without dementia. Financial impacts on family caregivers can include diminished retirement savings and reduced earnings.
Doctors aren’t sure how to prevent dementia
The ugly, uncomfortable truth is that dementia is relatively common in senior adults and becomes more prevalent as we age. That means this illness is likely to affect almost all of us, whether we get it ourselves or because a parent, grandparent, spouse, sibling, or friend gets it.
Dementia refers to a loss of mental acuity that affects memory, thinking, and planning — basically, the skills we need to take care of ourselves — and progressively worsens. Alzheimer’s is the most common type.
Dementia has several causes, among them long-term high blood pressure, a series of small strokes, Parkinson’s disease, and severe head injury. Your genes can affect your chances of developing dementia, as can high LDL cholesterol levels, hardened arteries, smoking, heavy alcohol use, and diabetes.
Other than generally maintaining a healthy lifestyle, doctors aren’t sure how to prevent dementia. About 1 in 9 Americans aged 65 years or older has Alzheimer’s, according to the Alzheimer’s Association. One in 3 Americans aged 85 years or older has it. It’s not curable. Treatment is limited to symptom management.
The early stages of Alzheimer’s can be an especially vulnerable time financially, according to research by Carole Roan Gresenz and coauthors published in the journal Health Economics. An individual may not yet be diagnosed but may already be impaired enough to generate significant declines in their net worth — right as they’re about to incur increasing expenses to manage their disease.
The effects
The financial effects of Alzheimer’s and other forms of dementia fall into three broad categories.
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- The direct costs of treating and managing the illness.
- The indirect costs of financial mistakes caused by the illness’s effects on one’s ability to think clearly and make sound decisions.
- The effects of the first two situations on spouses and adult children (and their spouses and children).
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These three areas point up the importance of financial planning to prepare for the consequences of the disease.
Direct costs of treating and managing Alzheimer’s disease
A person diagnosed with Alzheimer’s or another form of dementia typically has a shortened life expectancy of less than 10 years, according to the UK-based Alzheimer’s Society. That can feel like far too little time to enjoy with loved ones while also being quite a long time to pay for medical care.
Because dementia is a progressive disease, patients are likely to need increasing levels of help with daily activities. Professional help can come at a steep cost: around $5,000 a month for a home health aide or assisted living, according to Genworth’s 2021 Cost of Care Survey. (These figures are not dementia-specific, but for the category of care, broadly speaking.)
Life insurance with a long-term care component can help with these expenses, which become significant when the patient requires 24/7 care. Especially in its moderate and advanced stages, dementia patients require close monitoring since the disease makes people behave in ways that can put themselves and others at risk of serious harm and accidental death.
People who can’t afford professional care — or who can’t find it — may have to reduce their hours at work or even leave the workforce to look after a loved one with this illness. That caregiving will involve providing transportation, because people with dementia will lose their ability to drive safely.
Tests to diagnose dementia will cost money. Patients will pay for primary care visits and possibly for blood tests, brain scans, and specialist visits and evaluations. Medicare Part B will help offset the cost of these services for covered individuals. Enrolling in a Medicare Special Needs Plan instead of regular Medicare may provide better coverage for dementia care. However, Medicare does not cover much of the daily hands-on help that people can require.
Adults diagnosed with early onset dementia may be forced to retire far earlier than planned. One possible source of financial support is a disability income insurance policy purchased individually or through an employer. The policy must be in place before symptoms develop in order for it to pay benefits for this condition.
Another place to turn for people under Social Security Retirement age:
Social Security Disability Income
Individuals under full retirement age — 66 or 67 depending on their year of their birth — can qualify for Social Security Disability Income, often referred to as SSDI, or a needs-based federal welfare program known as Supplemental Security Income, or SSI, for people who haven’t paid enough into the Social Security system. SSDI and SSI continue as long as you’re eligible.
However, someone who is already over their full retirement age will not qualify for additional benefits through Social Security based on any diagnosis.
These programs won’t provide nearly enough income to live on, let alone cover dementia-related needs. The average monthly benefit amount for SSDI was $1,361 in April 2022. The amount you can get depends on your earnings history at jobs where you paid Social Security taxes.
SSI would only come into play if your SSDI payment is under $861 in 2022. SSI pays a maximum of $841 if you have zero other income in your household, including your spouse’s income. Additionally, to qualify for SSI, you’d have to have resources under $2,000.
It can also take six to 12 months to get approved, according. The applicant should sign Form SSA-1696 appointing a friend or relative to help them with their claim in case their condition progresses and they can no longer handle their own affairs.
The good news? After 24 months of receiving these federal benefits, the recipient becomes eligible for Medicare. In the meantime, they will have to pay out of pocket for health insurance, unless they are eligible for Medicaid.
Indirect costs
Alzheimer’s disease can have indirect but profound costs due to poor decisions, mistakes, and fraud the individual previously would not have been susceptible to.
A trusted financial professional can be a key component of an individual’s care team. Finding the right professional and deciding which of their services to use and suggestions to take is a serious task.
The biggest mistake is meeting with a financial professional without an advocate or family member. The advocate or family member accompanying the person with dementia should ensure that any financial professional they use is in good standing with the regulatory agencies and professional associations they’re affiliated with. For example, they can look them up at the Certified Financial Planner website.
Effects on family
If a parent with Alzheimer’s makes poor financial decisions or gets scammed because of their illness, it can have ripple effects on the entire family. Even if they never make a bad decision, the cost of managing the disease can have a major impact on families.
Spouses may find their own retirement savings ravaged if they don’t implement guardrails as soon as possible. A spouse who was not the household financial manager may need a crash course in handling routine tasks and making key decisions. With less experience, they may not do the job as well as their partner did, especially with all the other new responsibilities associated with managing the illness.
Adult children, and perhaps grandchildren, may not receive the inheritance their parents hoped to leave for them. Or they may have to step in and use their own time and money to care for a parent. They may sacrifice retirement savings, children’s college savings, emergency funds, and even earnings. A spouse may have to retire early to provide care. And, of course, both spouses could end up with dementia, with neither being able to rely on the other for care.
Financial planning for Alzheimer’s disease
Many steps you will need to follow to take care of yourself or a loved one who is showing signs of dementia are the same steps everyone needs to take for proper estate planning. The Alzheimer’s Association has put together a Financial and Legal Document Worksheet to help families prepare. It’s essential for the patient to make these plans before they lose their capacity to do things like sign a will, appoint a personal representative, and move assets into a trust.
Steps you will want to take include identifying individuals or institutions to help manage the patient’s finances. Simplifying the patient’s finances is an important step that can make it easier to stay on top of all account activity.
Freezing credit and bank account profiles with the major credit bureaus can make it harder (but not impossible) for the patient or a scammer to open a new account and spend recklessly. Credit monitoring and alerts can allow for early detection of possible problems. In addition, the Alzheimer’s Association offers a free course for caregivers about managing care costs and planning for the future.
While still of sound mind, the patient should sign documents appointing someone they trust as their financial power of attorney who can access accounts, pay bills, and make financial decisions on the patient’s behalf if it becomes necessary. The person with dementia should also appoint a trusted contact for each of their brokerage accounts. The brokerage firm is supposed to get in touch with this contact if they observe suspicious activity that doesn’t align with the account holder’s typical behavior.
Conclusion
It’s always smart to be proactive in financial planning, but the financial risks associated with Alzheimer’s disease and other forms of dementia make it especially important to act early and quickly. The risks and new responsibilities can be overwhelming, but you don’t have to do it alone. You can turn to the Alzheimer’s Association, join a support group, and seek out financial professionals to get the help you will need to manage a challenging condition.
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