Economic Burden of Alzheimer Disease and Managed Care Considerations

August 17, 2020
Winston Wong, PharmD
Volume 26, Issue 8


Alzheimer disease is the most common cause of dementia and the fifth leading cause of death in adults older than 65 years. The estimated total healthcare costs for the treatment of Alzheimer disease in 2020 is estimated at $305 billion, with the cost expected to increase to more than $1 trillion as the population ages. Most of the direct costs of care for Alzheimer disease are attributed to skilled nursing care, home healthcare, and hospice care. Indirect costs of care, including quality of life and informal caregiving, are likely underestimated and are associated with significant negative societal and personal burden. Managed care organizations are in a unique position to develop utilization strategies that would positively impact early diagnosis and treatment to lead to better outcomes and lower costs for patients, caregivers, and the healthcare system. Additionally, the recent inclusion of Alzheimer disease diagnoses into risk corridor calculations by the Centers for Medicare & Medicaid Services may encourage Medicare Advantage organizations to invest in programs that aid in its early detection and diagnosis.

Am J Manag Care. 2020;26:S177-S183.


Dementia is a term for any disease causing a change in memory that impairs a person’s daily functioning.1 Alzheimer disease (AD), the most common type of dementia, is a degenerative disease characterized by loss of memory, loss of cognitive function, and functional impairment, with associated neuropsychological symptoms. As AD is a progressive disease, patients can be classified as having preclinical AD, mild cognitive impairment (MCI) due to AD, and mild, moderate, or severe dementia due to AD along the disease continuum. MCI is defined as deficits in memory with no significant impact on daily functioning, whereas MCI due to AD is defined as evidence of AD pathology and impairment in one or more cognitive domains that does not interfere with daily functioning. MCI can be a result of several conditions including, but not limited to, AD, cerebrovascular disease, Parkinson disease, frontotemporal degeneration, or traumatic brain injury. However, patients with MCI are more likely to develop AD than those who do not have MCI, suggesting that MCI may be an early sign of AD.2-7 Evaluation of patients with MCI and other risk factors for AD may help in early identification and diagnosis of AD.

AD has been identified as the sixth leading cause of death among adults in the United States, and the fifth leading cause of death among adults over 65 years.8 In 2018, more than 122,000 people died from AD, an increase of 146% from the year 2000. An estimated 5.8 million adults over 65 years are living with AD, with the number expected to more than double by the year 2050 to approximately 14 million individuals. A diagnosis of AD is typically not made until the patient has progressed to mild or moderate dementia. Many patients with AD go undiagnosed, and about 50% of Medicare patients are unaware they have a documented diagnosis of AD.

When evaluating the economic burden of AD, it is important to consider direct costs, such as skilled nursing care, home healthcare, and long-term care, and indirect costs, such as quality of life and the impact on the caregiver. Indirect costs of care have been shown to be higher than the costs of direct care for patients with AD and should not be overlooked when evaluating the cost of care for patients with AD.9 Many patients living with AD are undiagnosed; therefore, estimating true costs of AD care is difficult. The incorporation of medication therapy management (MTM) into AD care is an important strategy to optimize early medication initiation. Early detection and diagnosis of AD, leading to early initiation of current AD therapies, is associated with improved quality of care and quality of life, and economic and caregiver outcomes. Barriers to early diagnosis of AD include healthcare provider time restraints regarding testing and counseling, hesitancy of patient and caregiver reporting of symptoms, and lack of diagnostic resources in primary care.3-6,10,11

Direct and Indirect Costs of AD

As the prevalence of AD continues to rise with the aging “baby boomer” population, so do the costs of care associated with AD. The total cost of care for the treatment of AD in 2020 is estimated to be $305 billion. Medicare and Medicaid cover the largest proportion of these costs, estimated to be around $206 billion (≈68%), while patient out-of-pocket (OOP) costs are estimated to be around $66 billion (≈22%)2,12 (Table2).

Total costs for AD care are estimated to increase to more than $1 trillion by 2050. Direct medical costs associated with the treatment of AD include physician visits, emergency department and hospital admissions, long-term care or skilled nursing facility care, and medications. Direct nonmedical costs include home healthcare, transportation to medical visits, and modifications to adapt to changes in physical function. Long-term care and nursing home care costs account for the majority of direct costs associated with AD care.13

Direct costs of care reported for AD may vary depending on the time frame being evaluated, and may include analysis of end-of-life costs, lifetime costs, pre- and postdiagnosis costs, and prevalence-based costs.13 Total Medicare costs in 2019 for patients 65 years and older with AD or other dementias have been estimated to be $25,213 per person, about 3 times higher than those without AD ($7750). Medicaid pays for nursing home and long-term care services for patients with low income who meet certain criteria. The average annual Medicaid payments for beneficiaries with AD are estimated to be 23 times higher than those without AD (average $8779 vs $374).2

Three studies evaluated the direct costs of care for patients with AD around the time of death. A retrospective analysis evaluated 338,288 beneficiaries older than 69 years. Of these beneficiaries, 21% were classified as having AD. Beneficiaries with AD had costs on average of at least $18,000 more than those who did not have AD in the 8 years before death plus the year of death (P <.01), with most of these costs associated with skilled nursing care, home healthcare, and hospice care as compared with intensive medical treatments, such as Medicare Part B drugs (P <.01). Additionally, patients with AD had used 11% higher costs over the last 8 years of life compared to those who did not have AD.14 Kelley et al showed the mean adjusted total healthcare spending in the last 5 years of life was $287,038 in patients with dementia, compared with $183,001 in other disease groups (eg, cancer, heart disease).15 Another study estimated the cost of dementia to Medicare and Medicaid by analyzing the 1997 to 2005 Medicare Current Beneficiary Survey. Using cohort-based simulation models, the costs of dementia were estimated from the time of diagnosis until death. Patients with dementia had significantly higher annual Medicare and Medicaid expenditures at $10,814 and $6234 compared with those without dementia at $5953 and $1962, respectively (P <.05).16

One study evaluated direct costs of care for patients with AD around the time of diagnosis. A retrospective, observational cohort study using a 5% sample of the 2009 to 2013 Medicare claims files evaluated Medicare expenditures during the 24 months before and after the diagnosis of AD and related dementia (ADRD) or MCI, each with propensity score-matched controls. Patients in the ADRD group were older and had more comorbidities when compared with those in the MCI or control groups. During months 13 to 24 before diagnosis, the average Medicare costs for patients in the ADRD group were $10,533. Costs increased to an average of $15,091 in the 12 months before diagnosis. The 12 months after diagnosis were found to be the most costly, totaling on average $27,126, and decreased during months 13 to 24 after diagnosis to an average of $17,257 due to a decrease in inpatient and acute care. Utilization of inpatient care, home healthcare, and post-acute skilled nursing facility care significantly increased in the 12 months before and after diagnosis. Patients in the MCI group experienced similar trends as patients in the ADRD group when compared with the control group.17

As skilled nursing care, home healthcare, and hospice care have been identified as major drivers of direct costs of care in AD, it is important to review healthcare utilization in these settings. It is estimated that 32% of patients using home healthcare services, 42% of patients in residential care facilities, and 48% of nursing home residents have AD.2 Goldfeld and colleagues evaluated 323 nursing home residents over 18 months with advanced dementia in a prospective, cohort study to examine the factors associated with increased Medicare costs. The average total Medicare expense over 18 months was $8522 per resident. Medicare expenditures were highest for hospice care (45.6%), followed by hospitalizations (30.2%). Medicare spending was found to be highest in the last 90 days before death.18 Additionally, OOP costs for patients with AD are estimated to be higher than OOP costs for patients without AD. A retrospective, cross-sectional study using data from the 2012 Medicare Current Beneficiary Study aimed to estimate the OOP healthcare spending associated with ADRD. The average annual per-capita OOP spending was $3285 in patients with ADRD and $1895 in patients without ADRD. The majority of OOP spending in patients with ADRD was for prescription drugs and home healthcare services.19

Indirect costs of care associated with AD include caregiver burden and associated healthcare utilization and costs.13 Family and friends may take on the burden of caregiving due to a sense of obligation and love, and desire to keep their loved ones comfortable in their own homes. This desire to keep loved ones at home is supported by the observation that patients with AD and dementia will be less agitated and more comfortable in surroundings that they recognize and are familiar with. Informal caregiving is the unpaid care that is provided to a patient with AD by their family and friends. It has been estimated that 75% of caregiving for a patient with AD is informal care.13 Providing care to a patient with AD is financially, physically, and emotionally burdensome to the caregiver. Caregiving for patients with AD is unique compared with caregiving in other disease states due to the long duration of disease, and the progressive, unrelenting decline in cognitive and physical functioning.2 The majority of AD care consists of assisting with activities of daily living (ADLs), but many more AD caregivers report also handling finances and advocating in terms of healthcare than non-AD caregivers. Other caregiver tasks for patients with AD include ensuring medication compliance, managing behavioral symptoms of the disease, finding and participating in support services such as adult day programs, and organizing in-home care.2,20

Several studies have examined the impact of AD on the caregiver. When evaluating the financial impact of informal caregiving in AD, researchers have typically expressed these costs as either replacement cost of hiring formal care or forgone wages. In 2019, 16.3 million informal caregivers provided an estimated 18.6 billion hours of unpaid care. When evaluating the cost using replacement costs of care valued at $13.11 per hour, the estimated value of informal care provided in 2019 was $244 billion.2 A retrospective cohort study evaluated social costs and financial risks in Medicare fee-for-service beneficiaries older than 70 years from the Health and Retirement Study in the 5 years before their death between 2010 and 2015. This study found that costs of informal care for patients with AD were significantly higher than those with other conditions, including cancer and heart disease. The costs of informal care, measured in this study by replacement costs, were found to be $83,022 for patients with AD versus $38,272 for other diseases.15 A large, multicenter, prospective cohort study used bivariate probit models to estimate home health and informal care utilization and costs in patients with AD from the Predictors Study over a span of 7 years. This study estimated informal caregiving costs by using the national average hourly earning for all private industries for each year. The majority of patients received informal care (80.6%), which increased from 4 hours of care per day at baseline to 7.6 hours per day at year 4. The costs of informal care were estimated to be $20,590 for the baseline year, and increased to $43,031 in year 4.21 It is estimated that informal caregiver costs increase 18% per year as symptoms of AD progress.22 Lastly, one study estimated the “welfare cost,” a more comprehensive cost estimate of informal caregiving that takes into account the value of time, implications for future employability, and intrinsic benefits that accrue to daughters caring for mothers with AD, and the cost of forgone wages in the same population. When comparing cost estimates of informal caregiving over 2 years, the average cost in forgone wages was estimated to be $24,500 over all health states (needing assistance with ADLs only, memory only, both, or cannot be left alone) compared with welfare cost of $180,000. This study highlights that the financial impact on the informal caregiver may be much greater than other current estimates, and estimating by forgone wage or replacement costs, provide underestimates of informal care costs.23

The impact on physical health of the caregiver and the associated healthcare utilization and costs are often overlooked. Caregivers to patients with AD have been shown to have higher rates of stress, depression, anxiety, physical ailments, increased cardiovascular disease, and weakened immune systems. One study showed that as the comorbid diseases in patients with AD progressed and dependence on the caregiver increased, healthcare utilization and costs of the caregiver increased.24 A retrospective cohort study using Medicare Advantage Prescription Drug Plan members with a diagnosis of AD and their household members compared with those without AD evaluated the medical condition burden, healthcare usage, and healthcare costs of the caregiver. Rheumatoid arthritis, mood and anxiety disorders, insomnia, and substance use/abuse were significantly more prevalent in household members caring for patients with AD. Household members caring for patients with AD had significantly higher average annual healthcare costs ($7168 ± $10,050 vs $6301 ± $8311; P <.001).25 Therefore, it is imperative to support and treat the caregiver as much as the patient. Caregiver interventions include case management, educational and psychotherapeutic approaches, respite care options, and support groups. Education on the progression of the disease, how to find and access help, and optimal usage of resources to assist in providing AD care have shown to have a positive impact on AD caregivers.

The quality of life (QOL) in patients with AD is also significantly negatively impacted. Dementia interferes with daily functioning and independence, and places not only an economic burden, but also a heavy personal burden on the patient and their caregivers. The symptoms of dementia are disabling, the degree to which depend largely on the stage of AD. Symptoms include loss of memory, difficulty speaking, psychological and psychiatric changes, and the inability to perform ADLs.2 According to Lawton’s model of QOL in AD, physiological well-being, behavioral competence (eg, cognitive and functional ability), and objective environment (eg, caretakers and living situation) are the 3 main factors that contribute to QOL in patients with AD.26 The long duration of AD contributes to the negative impact it has on public health and decreases in QOL. To quantify this, disability-adjusted life-years (DALYs) assess the number of years of life lost due to a disease. DALYs are calculated as the number of years of life lost (YLLs) due to premature mortality plus the number of years lived with disability (YLDs), totaled across all those with the disease or injury.2 According to The State of US Health, 1990-2016: Burden of Diseases, Injuries, and Risk Factors Among US States, AD ranked number 4 in YLLs and 19 in YLDs, indicating the high burden of disease to the patient and the caregiver.27 Although it is known that QOL is negatively impacted in individuals with AD, there is a paucity in data quantifying the cost of decreased QOL in the patient.

Early Treatment Optimization Strategies

The overall goals of treatment for patients with AD are to maintain QOL; maximize function in daily activities; enhance cognition, mood, and behavior; foster a safe environment; and promote social engagement. These goals are achieved by regular monitoring of health and cognition in patients with AD, providing education and support to patients and their caregivers, and initiation of pharmacologic and nonpharmacologic interventions.28 The National Plan to Address Alzheimer’s Disease was established in 2012 to fulfill the 2011 National Alzheimer’s Project Act (NAPA), which established a set of goals to address the current needs of patients with AD and prevent future cases of AD and ADRD. These goals include prevention and effective treatment of AD by 2025, optimizing care quality and efficiency, expanding support for patients with AD and their families and caregivers, enhancing public awareness and engagement, and tracking progress to drive improvement.29

Unfortunately, most patients with AD are diagnosed in the late stages of the disease when the symptoms are noticeable, with very few patients being diagnosed in the preclinical stages. As a response to the detrimental impacts and costs of misdiagnosed or undiagnosed AD, new practice guidelines for the clinical evaluation of AD in primary and specialty care settings were released at the 2018 Alzheimer’s Association International Conference. These guidelines sought to improve and coordinate efforts for more timely and accurate AD diagnosis and evaluation of symptoms, as well as providing continued care and support for the affected individual and their caregivers. The guidelines focus on recommendations for appropriate, timely evaluation and assessment, and highlight the importance of including the caregiver in all aspects of AD care.30

In its recent practice recommendations, the Alzheimer’s Association renewed the focus of care on the individual with dementia and their caregiver in a person-centered care delivery model that focuses more on the individual’s unique needs, personal experiences, and strengths rather than the loss of abilities.2 The Alzheimer Association guidelines for the treatment of dementia-related behaviors indicate that nonpharmacologic psychosocial interventions should be used as first-line interventions. For the treatment of cognitive symptoms of AD, current pharmacologic agents approved for use in the treatment of patients with AD at various stages of the disease include cholinesterase inhibitors (donepezil, galantamine, and rivastigmine) and memantine.31 These current pharmacologic therapies for AD provide symptomatic relief by improving cognitive symptoms of memory loss and confusion, but do not stop AD progression.32 Promising disease-modifying therapies that target inflammatory processes, tau proteins, and β-amyloid proteins are currently in development.

In the preclinical stages of AD, patients do not show signs of MCI or dementia, but may have measurable changes in the brain that can be detected on positron emission tomography scans, by specific biomarkers, possibly by retinal nerve fiber layer thickness as detected on optical coherence tomography, or other changes that may be detected through varying laboratory and genetic tests that are in development.2,33 Patients with MCI are more likely to have AD than those who do not have MCI, suggesting that MCI may be an early sign of AD. If MCI is properly detected and diagnosed, this may lead to an earlier diagnosis of AD.34,35

Early diagnosis of AD can lead to earlier interventions, both pharmacologic and nonpharmacologic, to help maintain and improve physical and cognitive functioning.36 Early diagnosis may lead to earlier interventions, such as coordinated care planning involving the affected individual, better management of symptoms, reduced costs, and better QOL for the patient and caregiver.37 One study evaluated the costs and benefits of early identification and treatment of patients with AD using a Monte Carlo cost-benefit analysis. This analysis showed that early diagnosis and management of patients with AD with pharmacologic and nonpharmacologic measures would lead to cost savings, with cost savings being greatest when AD cases were diagnosed earlier. Cost savings were greatest when drug treatment in combination with caregiver interventions (eg, increased counseling and support) were initiated when cognitive impairment was lower. For example, a Monte Carlo cost-benefit analysis predicted that the net savings for a 70-year-old woman with MCI (defined as a Mini-Mental State Examination score of 28) may be estimated at $125,000 in social benefits, $16,000 in state fiscal benefits, and $34,000 in federal fiscal benefits.38 De Vugt and colleagues argue that early diagnosis of AD allows the informal caregiver to have more time to adjust to their role in providing care for their loved one with AD, but highlight the importance of the caregiver finding the support they need in caring for a patient with AD. While stress levels may be lower in the preclinical stages of AD, early interventions and support can help the caregiver anticipate and plan for future care needs and allow the patient to be involved in the decision-making process.39 More studies assessing the impact of early diagnosis and early intervention on quality of life, caregiver burden, and economic burden are needed as more patients receive a diagnosis earlier.

Managed care organizations (MCOs) have a unique opportunity in developing medication utilization strategies that support the goals of the National Plan and have an impact on early diagnosis and treatment that can lead to better outcomes and lower costs for patients, caregivers, and the healthcare system. While there is promise in the various emerging treatment options to modify the progression of AD, the current pharmacologic therapies that provide temporary, symptomatic relief are associated with significant adverse effects that often lead to noncompliance. Appropriate utilization of current pharmacotherapy options and care coordination is important for managing costs of AD, as well as optimizing QOL and care for patients with AD and their caregivers.

To achieve this, MCOs must first prioritize and encourage appropriate, timely testing for cognitive status earlier in the disease process. MCOs can prioritize review of emerging treatment options that target inflammatory processes, tau proteins, and β-amyloid proteins as they become available. One study suggests that the maximum effective price of these potential disease-modifying therapies per patient per year is $10,000 from a payer perspective under the willingness-to-pay threshold of $150,000 per quality-adjusted life-year, assuming 20% reduction relative to standard of care.40 Care planning should be initiated for all patients with AD, as it provides individuals with cognitive impairment and their caregivers information on medical and nonmedical treatments, and helps to coordinate care among clinicians vital to the care of patients with AD.41

MCOs can also use MTM approaches to help initiate and maintain patients on currently approved pharmacologic agents in the treatment of AD early in the disease process. MTM is a process of collecting patient-specific information, assessing medication therapies to identify medication-related issues, and creating a plan to resolve these issues. The core elements of MTM services include medication therapy review, personal medication record, medication-related action planning, intervention/referral, and documentation and follow-up. MTM is especially important in chronic disease states with several comorbidities. Disease management programs that incorporate MTM have been developed for AD, as patients with AD and their caregivers manage this complex, progressive disease and associated comorbidities at home. Disease management programs that incorporate MTM services have been shown to reduce healthcare costs and improve QOL of the patient and caregiver.42 Additionally, caregiver coaching can help to educate, prepare, and train the caregiver to minimize caregiver burden. Caregiver coaching includes, but is not limited to, education on AD, how to manage changes in behavior and communication, personal care and hygiene tips, home safety and fall prevention strategies, medication management, how to manage financial and legal matters, and emergency procedures. There are many resources and support groups available for caregivers of patients with AD, and it is imperative for the caregiver to have a support team while caring for their loved one with AD.43

The Centers for Medicare & Medicaid Services (CMS) uses a risk-adjustment mechanism, currently the Hierarchical Condition Category (HCC) risk adjuster, to calculate revenue payments made to Medicare Advantage organizations (MAOs) for their Part C Medicare Advantage (MA) plans. This is done so that MAOs do not select their members by their risk score, but allows for a market where quality and efficiency of service is optimized. Risk scores are calculated by patient medical diagnoses submitted to CMS from the prior year, which are then used to calculate member-specific revenue payments, which make up most of the revenue of the plan. Thorough diagnosis coding and submission, and retention of members, directly impacts the ability of the MAO to maintain and increase their revenue.44 CMS released its proposed risk score methodology for MA plans for 2020 in December 2018. In January 2020, CMS included 2 additional HCC risk adjusters for patients with dementia, which includes patients with AD to the risk score calculation methodology. Therefore, it is in the MAO’s best interest to actively identify and track costs for patients with AD and dementia to be included in their risk-adjustment calculations. MAOs are encouraged to provide care to patients with AD and dementia because the costs are already included in their risk-adjustment calculations and are being paid to provide the services.45 This will also encourage MAOs to invest in programs that aid in early detection and diagnosis of AD.

In addition to pharmacologic therapy, early nonpharmacologic interventions, such as learning basic strengthening exercises and learning how to use basic self-help assistive devices while patients with AD have the capacity to learn them, can help patients maintain autonomy in ADLs and physical and cognitive functioning. The American Academy of Neurology recommends that patients with MCI exercise regularly as part of an overall approach to managing their symptoms and to consider cognitive training.46 Physical and occupational therapy for learning and maintaining fine and gross motor function skills are important aspects of nonpharmacologic management to help maintain ADLs. Physical therapists are well trained to assist in exercising by using specific methods, techniques, and approaches to help maintain physical functioning in patients with AD, including sight, sound, and touch cues for walking, mirroring movements, task breakdown to safely get out of bed, hand-over-hand guidance to learn different motions, and muscle training to help patients walk safely.47 Occupational therapists can evaluate the home for safety to prevent falls or injuries, create safety plans to keep the patient safe while at home when the caregiver is unavailable, and observe the patient at home to recommend changes to foster independence.48 Various cognitive training programs, including cognitive stimulation therapy (CST), are being considered for coverage by MA plans under supplement benefit funds from CMS.49,50 CST has been shown to be a cost-effective early intervention in patients with dementia, and is typically delivered in a group setting consisting of cognitive-based tasks and activities, such as word games and puzzles. A multicenter, single-blind, randomized control trial evaluated the effect of CST on cognition using the AD assessment scale-cognition (ADAS-Cog) in patients with AD. CST showed a significant impact in improving the ability to follow commands and spoken language ability in patients with AD (P <.05).51 The use of assistive devices for ADLs can help patients with AD maintain their independence, and includes devices such as button, zipper, and sock aids to help get dressed, and modified utensils, plates, and bowls to assist in eating.52,53 Technological advances in medical equipment for patients with dementia who have several comorbidities with high pill burden, such as automated pill dispensers that remind patients with AD to take their medications, may have a positive impact on medication management and reduce healthcare utilization for comorbid disease states.MCOs should consider coverage of nonpharmacologic therapies and tools that have shown to be cost-effective, and increase QOL in patients with AD and their caregivers.


AD is prevalent among adults older than 65 years and is often misdiagnosed or underdiagnosed. The economic burden from treating patients with AD is overwhelming, and estimated to increase in the coming years as the population ages. The direct costs of care for patients with AD are largely attributed to skilled nursing care, home healthcare, and hospice care, and have been shown to be significantly more costly for patients with AD as compared with other diseases. The costs of informal care and QOL burden have also been shown to be significantly higher in patients with AD and their caregivers than other disease states. The financial and personal burden experienced by caregivers to patients with AD is immense and often underestimated. It is important to treat and support the caregiver of patients with AD just as much as the patient with AD. MCOs can have a profound impact on the QOL of the patient with AD, caregiver burden, and economic and healthcare burden of AD by supporting early diagnosis of AD with MTM strategies, early review of emerging therapies, care coordination, and providing covered nonpharmacologic interventions.

Author affiliation: Winston Wong, PharmD, is president of W-Squared Group, Longboat Key, FL.

Funding source: This activity is supported by an educational grant from Biogen MA, Inc.

Author disclosure: Dr Wong has no relevant financial relationships with commercial interests to disclose.

Authorship information: Substantial contributions to the concept and design; drafting of the manuscript; overall supervision; and critical revision of the manuscript for important intellectual content.

Address correspondence to:

Medical writing and editorial support: Elenna M. Smalley, PharmD, BCPS


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