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Financial cost of dementia

1. Summary

Dementia is an expensive condition with a considerable cost to both public and private finances. The NHS and social service spend considerably on dementia services. However, a large proportion of the cost of caring for a person with dementia is borne by carers rather than the NHS or social services. In total, dementia is estimated to cost the UK £23 billion a year. Alzheimer’s Society believes that the best solution to this is a new, fair funding system for social care which shares the costs of care beyond those unfortunate enough to develop a medical condition such as dementia.

2. Background

With an early diagnosis and appropriate information and support good quality of life could be possible. However, over time many people with dementia and their also pay a high price in terms of their quality of life.

While the costs of dementia are expected to rise in coming years because of growing numbers of people affected, there is significant scope for spending money more efficiently and effectively. The 2011 report of the All Party Parliamentary Group on Dementia 20 billion question inquiry report, demonstrated significant potential for more cost effective dementia services.

The most up to date analysis of the financial cost of dementia come from Alzheimer's Society's Dementia UK report published in February 2007.

2. The Cost of dementia

Dementia UK found that the total costs of dementia in 2007 amounted to £17.03 billion per annum. Since 2007 the total cost of dementia has continued to rise: updated figures for 2012, published with the Society's Dementia 2012 report, put the cost at £23 billion with 800,000 people living with the condition, with an average cost of £29,746.

The Dementia UK report estimated that the total annual cost per person with dementia in different settings in 2007 was as follows:

  • People in the community with mild dementia - £14,540
  • People in the community with moderate dementia - £20,355
  • People in the community with severe dementia - £28,527
  • People in care homes - £31,263.

The overall costs of dementia in the UK were calculated using new data on the prevalence of dementia from Dementia UK , together with other data. Costs included were those provided by formal care agencies as well as the financial value of unpaid informal care provided by family and friends. Costs were not available for the 2% of people with dementia under the age of 65.

Over a third of the total cost (36%) was due to informal care inputs by family members and other unpaid carers. Not included in this amount is the estimated £690 million in lost income for those carers who have to give up employment or cut back their work hours. This lost employment means a loss of £123 million in taxes paid to the Exchequer.

Accommodation accounted for 41% of the total cost.  The greatest proportion of direct costs of dementia care is associated with institutional support in care homes. This is often provided at a crisis point, is always costly and often precipitated by a lack of effective support.

3. Projected future costs

A 2008 report by the the health think tank The King's Fund, Paying the Price, projected how the financial cost of dementia in England would rise in coming years. The King's Fund found that the cost of in England would rise from £14.8 billion in 2007 to £34.8 billion in 2026, a rise of 135 per cent. A separate study projected that costs to the UK as a whole would rise to £50 billion by 2038.

4. The Dementia Tax

Because the majority of the package of care that people with dementia receive is typically provided through social services and is means tested, people with dementia end up paying significant amounts towards their care. This places the burden of cost of care heavily on people with dementia and their families. Average residential care home costs in the UK are £479 per week, while average nursing home costs are £669 per week.

Alzheimer's Society's 2008 Dementia Tax report found that the impact of charging for care is now felt across all socio-economic groups and is not confined to people of moderate and higher means. The report also found many people are not receiving the quality of care they deserve and often have to pay substantial amounts of money for poor quality care.

Further details on Alzheimer's Society's position on charging for care can be found in our charging for care position statement.

5. Cost to the NHS

Dementia places substantial financial pressure on the NHS with up to a quarter of hospital beds occupied by someone with dementia. Alzheimer's Society's 2009 report, Counting the Cost, found people with dementia often stayed in for far longer than expected and that their symptoms of dementia and general health got worse the longer they remained in hospital. Counting the Cost identified unacceptable variation in the quality of care and identified considerable savings which could be made by improving the quality of dementia care and reducing average length of stay. 

Find out more about Counting the Cost

6. Potential savings

There is significant potential for more effective use of the current resources spent on dementia. In 2009, the All Party Parliamentary Group on Dementia published the report of their inquiry into improving lives through cost effective dementia services. The £20 billion question was based on evidence submitted from across the health and care sectors and it concluded current resources could be used more effectively to achieve better outcomes for people with dementia and their carers. The report made recommendations including improving collaboration and integration, more training in dementia care, improving rates of diagnosis and sharing good practice.

Other reports and evidence reiterate the potential for more effective use of resources, especially through improved diagnosis and early intervention, improving hospital care and reform of the system of funding social care.

7. Improved diagnosis and early intervention

In 2007 the National Audit Office (NAO) report Improving services and support for people with dementia found that the services for taxpayers were failing to provide value for money for taxpayers. The NAO found health and social services were spending significantly on dementia, but this spending was often late, with too few people diagnosed or supported early enough. They stated that early interventions that are known to be cost effective, and which would improve quality of life, are not being made widely available.

The case that early intervention in dementia is cost effective is further supported by the economic metric developed by Professor Sube Banerjee for the Department of Health. This metric set out that, over time, the investment into early diagnosis and early intervention would result in an overall societal cost saving by a reduction in admissions to long term care. The metric can be found in appendix to the consultation document for the National Dementia Strategy on the Department of health website.

Diagnosis and early intervention services could be improved through measures set out in the 2009 National Dementia Strategy for England (NDSE):

  • The expansion of memory services to provide earlier diagnosis and support.
  • Improved information and support, including through commissioning of dementia adviser services
  • The development of peer support and learning networks to provide direct local support to people with dementia and their carers.

Alzheimer's Society is committed to campaigning for implementation of the NDSE and we know progress is being made in some parts of the country. However, in 2010 the NAO published an interim report on dementia, which looked at progress on implementing the NDSE. The NAO raised concerns about a lack of information on the costs of dementia services and the savings which could be realised from implementing the NDSE. In its Interim report, the NAO called for greater clarity over the costs, benefits and potential savings of improving dementia care and implementing the NDSE.

8. Improved dementia care in hospitals

The financial cost of dementia to the NHS could also be reduced through better quality hospital care and by reducing average length of stay of people with dementia in hospital. The Society's Counting the Cost report showed that, by reducing the length of stay of people with dementia in hospital by a week, the NHS could save £80 million a year for just four common conditions. Across all conditions savings from reducing the length of stay of people with dementia by a week could run into hundreds of millions of pounds.

In Counting the Cost, the Society made several recommendations for improving dementia care in hospitals which would help reduce length of stay. These included specialist support and training for nurses and nominated dementia leads.

The Society also believes people with dementia could receive important benefits from rehabilitation and therapy services (often described as intermediate care). These services are set up to support people to leave hospital earlier but people with dementia have traditionally had difficulty accessing them. Improved access to rehabilitation and therapy services could reduce length of stay in hospital, enabling people to receive better care for less. Improved community support services would also reduce the financial impact of dementia on hospitals by helping avoid crisis admissions.

9. A new system of funding social care

The Society is calling for political parties to work together to establish a new system of funding social care where the risk is shared beyond people unfortunate enough to develop specific medical conditions such as dementia. A viable system of funding social care is essential for a sustainable NHS. The current system means many people with dementia and their carers cannot get access to support until their needs reach crisis points. This has a profoundly negative consequence for people with dementia and their carers and also places pressure on hospital and other NHS services.

10. The Society campaigns for:

  • A new fair funding system for social care which shares the costs of care beyond those unfortunate enough to develop a medical condition such as dementia
  •  Investment in diagnosis and early intervention services to improve community support for people with dementia and reduce pressure on acute and long term care
  • Improved dementia care in hospitals in order to reduce length of stay of people with dementia.

11.  References and further information

Harvey, R. et al. (1998) Young onset dementia: epidemiology, clinical symptoms, family burden, support and outcome. The Dementia Research Group, Imperial College School of Medicine, London.

Souetre, E., Thwaites, R. and Yeardley, H. (1999) Economic impact of Alzheimer's disease in the United Kingdom. British Journal of Psychiatry, 174, 51-55.

Lowin, A., Knapp, M. and McCrone, P. (2001) Alzheimer's disease in the UK : comparative evidence on cost of illness and volume of health services research funding. International Journal of Geriatric Psychiatry, 16, 1143-8.

National Audit Office (2007) Improving services and support for people with dementia. London.

Knapp, M., Prince, M. et al. (2007) Dementia UK (A report to the Alzheimer's Society on the prevalence and economic cost of dementia in the UK produced by King's College London and London School of Economics). Alzheimer's Society: London.

Feinstein, L., Vorhaus, J., and Sabates, R. (2008) Foresight Mental Capital and Wellbeing Project. Learning through life: Future challenges.The Government Office for Science, London.

The King's Fund (2008) Paying the Price: The Cost of Mental Health in England. London.

Department of Health (2008) Transforming the Quality of Dementia Care: consultation on a National Dementia Strategy. London.

Alzheimer's Society (2008) The Dementia Tax: Charging people with dementia for inadequate care London.

Alzheimer's Society (2008) Counting the Cost: Caring for people with dementia on hospital wards. London.

Department of Health (2009) Living well with dementia: A National Dementia Strategy. London.

Laing and Buisson (2009) Care of Elderly People UK Market Survey 2009. London.

National Audit Office (2010) Improving Dementia Services in England- an Interim Report.

All Party Parliamentary Group on Dementia (2011). £20 billion question. Alzheimer's Society. London.

Alzheimer's Society (2012). Dementia 2012: a national challenge. Alzheimer's Society. London.

Last updated: May 2012 by Chris Quince

Dementia 2012

Alzheimer's Society Dementia 2012 report on how well people are living with dementia in 2012 in England, Wales and Northern Ireland.

Alzheimer's Society Counting the Cost report

Alzheimer's Society's Counting the Cost report:Caring for people with dementia on hospital wards.

Alzheimer's Society's Dementia Tax report

Alzheimer's Society's Dementia Tax report


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