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WASHINGTON — As the number of older Americans continues to grow, so too does the specter of Alzheimer's disease and related dementias (ADRD). These memory disorders not only rob individuals of their cognitive faculties but also, as new research reveals, their financial well-being - often years before a formal diagnosis.
A study led by researchers at Georgetown University and the Federal Reserve Bank of New York has uncovered a troubling pattern: In the five years preceding a memory disorder diagnosis, individuals' credit scores steadily decline while their likelihood of debt delinquency increases. This financial deterioration, the researchers argue, is a direct consequence of the cognitive impairment that characterizes the disease, even in its earliest stages.
The study, which examined anonymized credit report data linked to Medicare claims for over two million older adults, paints a stark picture. On average, credit scores fell by four to six points in the year prior to diagnosis, a significant drop considering that scores typically range from 300 to 850. Simultaneously, the probability of falling behind on debt payments rose by one to two percentage points. While these changes may seem small, they can have outsized impacts, leading to higher interest rates, reduced access to credit, and even foreclosure.
Particularly concerning was the effect on credit card and mortgage debt, the two largest debt categories for older Americans. The study found that among credit card holders, the likelihood of delinquency was 21% higher two years before diagnosis. For mortgage holders, the delinquency rate was 11% higher in the same timeframe. These heightened delinquency rates persisted for years after diagnosis.
“The results are striking in their clarity and consistency,” says health economist and the study’s lead researcher, Carole Roan Gresenz, PhD, a professor at Georgetown’s School of Health and McCourt School of Public Policy, in a media release. “The financial decline we observe mirrors the cognitive decline that these individuals are experiencing: credit scores consistently decline, quarter by quarter, and probability of delinquency consistently increases as diagnosis approaches.”
The researchers suggest that there are several explanations for this pre-diagnosis financial decline. Early-stage dementias can lead to memory lapses, causing individuals to forget to pay bills. It may also impair financial decision-making, leading to risky borrowing or vulnerability to financial exploitation. Certain personality changes associated with early Alzheimer's, such as decreased conscientiousness and increased neuroticism, may also play a role.
Importantly, the study found that these financial effects were more pronounced among Black and female individuals. Black adults experienced a steeper pre-diagnosis drop in credit scores and a sharper rise in delinquency rates compared to White adults. Women's credit scores recovered more slowly post-diagnosis than men's. These disparities likely reflect the well-documented delays in memory disorder diagnosis among these populations.
The findings underscore the dual burden faced by households contending with ADRD. Not only do they shoulder significant care costs - tens of thousands per year, on average - but they do so with diminished financial resources. The pre-diagnosis credit score declines and delinquencies can trigger a cascade of financial consequences, from higher interest rates to reduced credit access, at a time when financial flexibility is paramount.
The study's authors emphasize the need for early detection of dementia, a challenging prospect given the disease's gradual onset. They suggest that credit report data, already collected routinely for most adults, could be a valuable tool. Algorithms could potentially flag unusual patterns - rising delinquencies, erratic borrowing - as early warning signs, triggering a medical evaluation.
The findings also highlight the importance of financial protections for those with cognitive impairment. Possible measures include tighter oversight of financial decision-making, “advance directives” that guide financial management, and more stringent fiduciary standards for those handling ADRD patients' finances. Banks and credit agencies also have a role to play in detecting and preventing financial exploitation.
As the nation's population ages, dementia will touch an ever-growing number of families. Understanding and addressing its financial ramifications - both before and after diagnosis - will be crucial to ensure the economic security and dignity of those afflicted. The hidden costs of this disease, as this study powerfully demonstrates, are too high to ignore.
EdNews Editor-in-Chief Steve Fink contributed to this report.
