U.S. dementia costs to reach $781 billion in 2025 — who’s really paying for it

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The price of dementia in the United States will hit a new high: $781 billion in 2025 alone. Most of that cost isn’t coming from hospital bills or prescription drugs — it’s being paid in unpaid labor, lost income and the emotional weight carried by families and caregivers.

That’s according to a new report from the University of Southern California’s (USC) Schaeffer Center for Health Policy & Economics, which offers the most detailed national estimate of dementia-related costs to date. The research is part of the U.S. Cost of Dementia Project, a federally funded effort to track the economic burden of dementia each year.

“This research demonstrates the enormous toll dementia places on patients, their families and care partners,” said Dana Goldman, PhD, founding director of the USC Schaeffer Institute for Public Policy & Government Service and co-principal investigator of the project.

Where the money really goes

Only about 30% of the $781 billion total — roughly $232 billion — is tied to direct medical and long-term care expenses. That includes $106 billion covered by Medicare, $58 billion by Medicaid and $52 billion paid out-of-pocket by individuals and their families. Another $16 billion comes from private insurance and other payers.

More than two-thirds of the total cost of dementia care is paid for by Medicare and Medicaid.

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However, that’s only part of the picture.

The majority of the cost — $549 billion — comes from factors that rarely make it into the spreadsheet. These include unpaid caregiving, lost income and profound decline in quality of life.

Family members and friends provide an estimated 6.8 billion hours of unpaid care each year. Valued at $34.50 per hour — the going rate for paid home care — that adds up to $233 billion. Many care partners also leave the workforce or reduce their hours, forfeiting about $8 billion in wages annually.

Then, there’s human cost. Researchers estimate that people living with dementia experience a drop in quality of life valued at $302 billion. For their care partners, that loss is valued at another $6 billion.

“Having a better understanding of who bears these costs and how they change over time can inform evidence-based policies that may ultimately reduce the financial impact of dementia,” said Julie Zissimopoulos, PhD, principal investigator of the project and co-director of the Aging and Cognition Program at USC.

Understanding dementia

Dementia isn’t a single disease — it’s a term used to describe a collection of symptoms that affect memory, language, reasoning and daily functioning. Alzheimer’s disease is the most common cause, but other types, like Lewy body dementia and frontotemporal dementia, also contribute to the growing burden.

This year, an estimated 5.6 million Americans are living with dementia, including 5 million people 65 or older, according to the USC report. As the population ages, that number is expected to rise sharply in the coming decades. A separate study published earlier this year in Nature Medicine projects that dementia cases in the U.S. will double by 2060, largely a result of the aging population.

The condition often forces family members into caregiving roles with little outside support, creating ripple effects on their income, well-being and ability to maintain their own health. Most existing cost estimates don’t fully reflect those tradeoffs.

A new model

The USC team built a dynamic cost model that pulls data from large national surveys, including the Health and Retirement Study, as well as administrative health data from the Centers for Medicare & Medicaid Services (CMS). It not only tracks health care spending, but also changes in work status, caregiving hours and quality-adjusted life years lost — offering a more complete picture of the disease’s impact.

With new Alzheimer’s treatments emerging and blood-based tests making early diagnosis more feasible, the researchers say their model can help forecast how these innovations could change the economic landscape.

“It also points to the potential value of developing ways to prevent and treat Alzheimer's and related diseases that cause dementia,” Goldman said.