Understanding the financial impact of dementia

We all know that a dementia diagnosis can wreak havoc on the family of the sufferer. Over and above the emotional and psychological burden of caring for a loved one who suffers from the disease, the financial burden – which extends far beyond the cost of medical care – can be difficult to bear. In this article, we explore the costs associated with treating dementia and caring for a dementia sufferer.

Dementia is a broad term used to describe various brain disorders that affect one’s ability to conduct activities of daily living independently. Symptoms can include sudden or gradual decline in memory, the ability to make complex decisions, and to manage one’s finances – making dementia sufferers easy targets for fraud, scams, and those with unscrupulous intentions. Besides for memory and decision-making, dementia also affects behaviour, language, motor skills and the ability to recognize people, things, and places. During the early stages of the disease, diagnosis can be difficult, and it is thought that degenerative changes to the brain can begin up to 15 years before formal diagnosis. Depending on the type of dementia, life expectancy can range from 5 years to 15 years from the time of diagnosis; and in the final stages of the disease, most dementia sufferers will require full-time care in terms of bathing, dressing, and feeding.

While there are many forms of dementia, such as vascular dementia and front-temporal dementia, Alzheimer’s disease is the most common form and accounts for between 70% and 80% of dementia cases. Although there is a dearth of data in South Africa, it is estimated that about 6% of those over the age of 65 have the disease, which is in line with the rest of the world – and the risk of suffering from dementia increases with age. While there is no cure for dementia, there is treatment available that can slow down the progression of the disease and manage the associated behavioural issues. Slowing down the disease’s progression, however, means that dementia patients can live longer and therefore require more care and intervention – which, in turn, has financial consequences.

Medical aids generally provide little in the way of cover for dementia. While ‘treatable dementia’ is listed as a Prescribed Minimum Benefit, schemes are only required to cover admission for the initial diagnosis and management of acute psychotic symptoms for one week. Unless you’re on a fully comprehensive medical aid, most medical schemes do not provide cover for home nursing – and the plan options that do are expensive and provide limited benefits. From diagnosis, dementia suffers can be faced with the costs of medication to slow down the progression of the disease, treat associated anxiety and depression, and to control behavioural issues such as hallucination and paranoia. In addition, geriatric psychiatrist consultations can cost in excess of R3 000 per session although, sadly, there are very few such specialists in South Africa.

However, with very few South Africans in a position to retire comfortably, the reality is that where a retiree is diagnosed with the dementia, the financially burden often falls to the immediate family of that person – and the economic costs are difficult to quantify. Home nursing is unaffordable to most families and can cost anywhere between R8 000 and R25 000 per month depending on the level of care required. Dementia care is a specialist field of nursing which, in most instances, is required in the more advanced stages of the disease. For families who cannot afford such care, the burden often falls on the economically active members of the family, particularly women which, in turn, can impact the family’s financial security and income generation.

While there are plenty of retirement villages that provide frail care and assisted living facilities, there are very few that provide specialised dementia care – and those that do come at a price. A dementia care facility can cost anywhere from R25 000 per month to R75 000 per month on the top end – a cost that is unaffordable to most South Africans. If the dementia sufferer has a dread disease policy in place, they could enjoy some financial relief by claiming from the policy, although keep in mind that pay outs could be dependent on the stage of the illness and the extent to which the patient can still perform acts of daily living. That said, dread disease cover is an excellent way of mitigating the financial risks associated with a dementia diagnosis.

The estate planning mechanisms required to assist with the management of a dementia patent’s affairs also come at a price. Where someone has an early dementia diagnosis, setting up a Special Trust Type A to house the assets of the patient is a useful option for managing their financial affairs, although naturally there are costs involved in setting up and managing a trust. Another option is to bring an application to the High Court of the appointment of a curator bonis to look after the dementia patient’s affairs, although this is a costly and somewhat impersonal, and can cost anywhere between R50 000 and R100 000. However, this process is cumbersome in that all steps taken by the curator bonis must be signed off by the Master, and the curator bonis has limited power of investment and this can have adverse financial consequences for the person’s estate.

A more affordable option is provided in terms of the Mental Health Care Act which allows a person to apply to the Master of the High Court for an administrator manage the affairs of a dementia sufferer. This process is fairly simple and can cost anywhere between R5 000 and R20 000 depending on whether you use an attorney for the application. In terms of the process, application must be lodged directly with the Master in whose jurisdiction the dementia patient resides, together with medical evidence in support of the application which clearly confirms the person’s mental incapacity. Once appointed, the administrator has the power to take care of and administer the property of the dementia patient, although the Act makes it clear that the administrator’s powers must be proportionate to the mental health status of the person concerned.

Where a person has been diagnosed with dementia but still has mental acuity, it is advisable to ensure that they check and update their Will because, as the disease progresses and their mental capacity declines, it will not be legally possible to do so. While many companies offer a free Will drafting service, be sure that the person drafting the Will has full insight into the dementia patient’s financial affairs and that they have suitable experience in this specialised field. The costs of having a Will drafted normally range from R500 to R5 000 depending on the complexity, so ideally employ an expert to draft this all-important document. At the same time, the dementia patient might also want to consider drafting a Living Will and/or an Advance Healthcare Directive, which are very useful end-of-life documents providing guidance to loved ones, doctors, and carers on how they wish to be cared for medically once they become mentally incapacitated. Templates for these documents can be freely downloaded meaning that there is generally no charge for putting these mechanisms in place.

We all like to think that dementia won’t happen to us or those that we love, but the reality is that the greatest risk factor for dementia is age. The longer we live, the greater the chance we have of being diagnosed with the disease. As a result, everyone’s retirement plan should include a ‘what if’ dementia scenario to ensure that no unnecessary financial burden is placed on those around us.

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