The Relationship Between Lifetime Out-of-pocket Medical Expenditures, Dementia, and Socioeconomic Status in the U.S

Abstract

Dementia is one of the most expensive medical conditions. The costs are borne by families, by private insurance and by society via public programs such as Medicaid in the U.S.. There is extensive research on the relationship between dementia and annual medical spending. This paper, instead, estimates cumulative lifetime medical expenditures that can be attributed to the onset of dementia using a nationally representative longitudinal survey from the U.S., the Health and Retirement Study. The lifetime expenditures are estimated by summing any out-of-pocket medical spending reported in the panel from age 65 to death. Censored cases are imputed using a non-parametric matching algorithm called splicing. For example, survivors to the most recent wave are matched to similar individuals from older cohorts who are observed at the relevant ages all the way through death. We find that those who live with dementia for at least half a year pay, on average, $38,540 more out of pocket from age 65 to death when controlling for length of life, demographics, lifetime earnings and comorbidities. The costs of dementia are almost exclusively due to spending on nursing homes. Spending on drugs, doctor visits or hospitals, is not significantly related to dementia. The lifetime costs of dementia are significantly larger for white and rich individuals, perhaps because they use higher quality nursing homes and because they have more financial resources to spend down before becoming eligible for Medicaid support.

Keywords: Dementia; lifetime costs; medical expenditure.

Figure A1.

Difference between the recipients’ and the spliced donors’ dementia probabilities

Figure A2.

Difference between the recipients’ and the spliced donors’ OOP medical expenditures

Figure 1.. Overview of the splicing methodology to define a sample of lifetimes from age 65 to death in the HRS

Notes: Case 1 represents cases who are observed in the HRS from the baseline age of 74-79 until death. Case 2 represents cases that are not observed to die in the HRS sample and people with missing Exit interviews. Case 3 represents the “Early Mortality” sample, who did not survive to be eligible for the baseline sample.

Figure 2.. Mean medical expenditures by spending categories and dementia probabilities six months before death

Notes: N = 3,766. Sample members are followed from age 65 to death. Expenditures are in 2014 dollars. 0% discount rate used. Weighted by the sample weight in the last HRS interview.