What is Hidden in Your Claims Data: The Invisible Cost of Dementia

When looking at medical costs, dementia is the second most costly condition for people 65 and older. If that information surprises you, you’re not alone.

Leaders of Medicare Advantage health plans and Medicare accountable care organizations (ACOs) tell me that – until recently – they did not realize that dementia is a cost multiplier, a major driver of avoidable hospitalizations and an exacerbator of chronic health conditions.

Why is the cost impact of dementia often not recognized?

Because the real costs of dementia are often invisible. Just as the earliest stages of dementia can elude diagnosis, the medical costs of caring for someone living with dementia can be difficult to uncover.

Dementia’s favorite hiding place is behind comorbidities. At least 42% of people living with dementia have five or more chronic conditions, and more than 95% have at least two comorbidities. These jaw-dropping statistics makes it easy to see how someone who is hospitalized with renal failure, for instance, will be “coded” as renal failure, with all the costs of care attributed to that diagnosis. Nevermind that the person’s kidneys are failing because their inability to manage their medications due to dementia is the root cause of the hospitalization. You’d have to look at all diagnostic fields in claims data to find the likely culprit: dementia.    

Another hiding place for dementia costs is behind symptoms. For example, a person with a urinary tract infection (UTI) can readily report their symptoms (e.g., pain while urinating, increased frequency of urination, back pain, feeling unwell) to a physician, who can in turn prescribe antibiotics. If that same person also has dementia, the underlying UTI will likely be masked by combative behaviors,  agitation, loss of appetite or delirium. Physicians who don’t know about the underlying dementia may prescribe antipsychotics, missing the underlying infection until it becomes septic and leads to a hospitalization. The associated costs of such treatments are unlikely to ever be attributed to the root cause, which is the person’s dementia.

Nonetheless, it is possible to make the costs of dementia visible in claims data for diagnosed patients. A study published in the AJMC - The American Journal of Managed Care analyzed a CMS 5% fee-for-service data sample, and attributed 23% of total medical care to beneficiaries living with dementia. Similarly, actuarial firm Milliman analyzed Medicare Advantage (MA) claims data and found that people living with dementia incurred 21% of total costs of care, presumably as a result of incurring 27% of all inpatient admissions and 37% of all readmissions.  These already staggering percentages would be even larger if you consider that more than half of patients with dementia remain undiagnosed. 

When you shine a light on dementia’s hiding places, the picture becomes clear: Dementia is expensive. And it is getting more expensive as the problem grows.

By 2040, the number of people living with dementia is expected to grow from 10% now to 14% of all US seniors who are eligible for Medicare – with a disproportionate number of those coming from minority populations.

The Centers for Medicare and Medicaid Services (CMS) is therefore understandably interested in addressing the rising cost of dementia care, particularly those hidden costs that masquerade as something other than dementia in claims data. To encourage better overall care and lower costs, CMS is incentivizing providers to include family caregivers in the care team. Family members – primarily spouses or adult children – are best positioned to detect and act on changes in a loved one’s  condition.

Launched in July 2024, the Guiding an Improved Dementia Experience (GUIDE) Model by the CMS Innovation Center is an alternative payment model designed to increase access to much-needed support for people living with dementia and their caregivers. 

CMS has recognized the critical role unpaid family caregivers play in dementia care and has selected Ceresti to participate in the GUIDE model. Providing family caregivers with personalized education, proactive coaching and on-demand access to resources, Ceresti is already realizing the improved outcomes and lower healthcare costs that CMS anticipated – not to mention lower caregiver burnout and increased health equity.

The opportunity to improve care and reduce medical costs for people living with dementia, has caught the attention of health plans and ACOs. Many are beginning to realize that effective interventions exist for a population that is not effectively engaged in traditional care management programs. They can implement a dementia care program that enables family caregivers to detect changes in a loved one’s condition and to teach them how to engage the healthcare system more effectively. In return, at-risk entities can reduce avoidable hospitalizations, lower medical costs, and drastically improve lives. 

A geriatrician who is familiar with the GUIDE model likened caregiver enablement to fall prevention. We know that when someone who is physically frail falls, the results can be catastrophic. Low-cost interventions, such as teaching caregivers how to help their loved ones avoid falls, can help people maintain their quality of life and avoid costly hospital visits.

The same is true of activating caregivers to proactively detect and address changes in a loved one’s condition. Whether it’s a subtle change in mental status, pronounced irritability or loss of appetite, caregivers who notice emerging changes can lean into primary care. This can ensure that their loved one gets the help they need before the condition escalates – keeping them out of the hospital and preserving their quality of life.

Health plans and ACOs have done a good job of addressing the costs of traditional chronic conditions such as diabetes, COPD, CHF and CKD. Care management approaches that engage patients directly have demonstrated success in reducing hospitalizations and lowering medical costs for these well-recognized conditions. But people with dementia largely are not enrolled in care management programs. And health plans have not yet uncovered the real costs of dementia that are hiding in their claims data, or fully embraced the need to include the family caregiver in the care team. 

Thanks, in part, to the GUIDE model, they are now realizing that dementia is a top target for cost savings.

It’s time for payers and at-risk providers to recognize a major cost multiplier that’s been hiding in plain sight for decades, and prioritize the care management of persons living with dementia. CMS has highlighted the need and provided incentives. When they do, health plans and ACOs will reduce avoidable hospitalizations and improve the lives of people living with dementia, their families and their caregivers.