10 Special reportDementia The EconomistAugust 29th 2020
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t is impossibleto quantify the most important of the costs of
dementia: the losses to people living with the condition. In a
forthcoming book, “The Great Demographic Reversal”, Charles
Goodhart and Manoj Pradhan, two economists, suggest that sur-
veys could be used to undertake a cost-benefit analysis of plans to
spend more on dementia. A sample of adults could be asked how
much annual income they would be prepared to pay to reduce the
risk of developing dementia, as it mounts with age.
The results would be at best subjective and indicative, but bet-
ter than nothing, which is all that is available now. Other costs—to
those caring for people living with dementia and to the economy—
are, in theory, more measurable. But the estimate cited earlier for
the global cost of dementia, an annual $2trn by 2030 (up from
$604bn in 2010 and $1trn in 2018), is little more than a guess. It re-
lies on extrapolation from countries with good data to others with
hardly any at all. And, as Marco Blom of the Alzheimer’s Society in
the Netherlands points out, straight-line projections are likely to
be exaggerated: 60-65% of the costs, he says, go to labour. There
will be too few workers for their number to increase in tandem
with rising dementia.
In adi’s World Alzheimer Report in 2015, Martin Prince of King’s
College London and others divided the costs between direct medi-
cal spending, social care and informal care. Direct medical costs
were the smallest of the three, about one-fifth of the total, com-
pared with twice as much for the other two. The distribution
changes with a country’s income. More spending in the develop-
ing world falls on informal care in the family or village. In high-in-
come countries 38% of costs are in informal care; in low-income
countries, 69%. Partly for this reason, and because wages are high-
er, global costs are concentrated in rich countries. Although nearly
60% of people with dementia are in low or middle-income coun-
tries, 87% of the costs arise in high-income ones. In fact 62% of the
costs are incurred in the g7 rich countries alone.
Every country must ask how these costs are to be met. With
health budgets overwhelmed by covid-19, and public borrowing
climbing to unprecedented heights to counter the virus’s eco-
nomic impact, the question is harder to answer than ever. Should
the government’s share, in public services or subsidies, be fi-
nanced out of taxation? If so, the expected rise in spending is so
large that tax rates might have to rise to politically unappealing
levels. So more countries are looking at a special earmarked tax or
at insurance. But that does not resolve the question of how costs
should be divided between the state and individuals and their
families, or how much families should pay directly towards care:
everything they can afford, or only up to some limit?
As in so much else to do with old age, Japan has had little option
but to confront the issue. Since 2000 it has had a universal long-
term-care insurance system. This was modelled in part on a
scheme introduced five years earlier in Germany, which has a priv-
ate, compulsory scheme (the insurance is obligatory, but the in-
surers are private). But, unlike Pflegeversicherung(care insurance),
Japan’s does not operate on strict insurance principles, with pre-
mium income covering costs. Rather, half of spending is covered
out of general taxation. Nor does it allow people to take cash in-
stead of services, ie, payment for care provided at home.In the Japanese scheme (which Britain is said to be eyeing with
interest), everyone aged 40-65 pays a premium, currently averag-
ing ¥6,000, or about $57, a month. Regardless of income or wealth,
those aged over 65 can claim benefits, after an assessment of needs
based on a questionnaire and a doctor’s report. Beneficiaries must
meet 10% of all costs themselves. In 2018, 5.5m people received
benefits, about 15% of the over-65 population.
Officials at the Ministry of Health, Labour and Welfare concede
that the scheme is not financially sustainable. Raising premiums
will not be enough. Either other taxes will have to rise, or benefits
must be cut, by increasing co-payments from beneficiaries or by
means-testing. Lowering the age at which people contribute to be-
low 40 is not being considered. It would be another tax on the
young in a society already unduly skewed towards the old.Almsfor oblivion
No country has found a sustainable way to pay for dementia careFinancing care