Alzheimer’s takes a financial toll long before diagnosis, study finds

Long before people develop dementia, they often begin falling behind on mortgage payments, credit card bills and other financial obligations, new research shows.

A team of economists and medical experts at the Federal Reserve Bank of New York and Georgetown University combined Medicare records with data from Equifax, the credit bureau, to study how people’s borrowing behavior changed in the years before and after a diagnosis of Alzheimer’s or a similar disorder.

What they found was striking: Credit scores among people who later develop dementia begin falling sharply long before their disease is formally identified. A year before diagnosis, these people were 17.2% more likely to be delinquent on their mortgage payments than before the onset of the disease, and 34.3% more likely to be delinquent on their credit card bills. The issues start even earlier: The study finds evidence of people falling behind on their debts five years before diagnosis.

“The results are striking in both their clarity and their consistency,” said Carole Roan Gresenz, a Georgetown University economist who was one of the study’s authors. Credit scores and delinquencies, she said, “consistently worsen over time as diagnosis approaches, and so it literally mirrors the changes in cognitive decline that we’re observing.”

The research adds to a growing body of work documenting what many Alzheimer’s patients and their families already know: Decision-making, including on financial matters, can begin to deteriorate long before a diagnosis is made or even suspected. People who are starting to experience cognitive decline may miss payments, make impulsive purchases or put money into risky investments they would not have considered before the disease.

“There’s not just getting forgetful, but our risk tolerance changes,” said Lauren Hersch Nicholas, a professor at the University of Colorado School of Medicine who has studied dementia’s impact on people’s finances. “It might seem suddenly like a good move to move a diversified financial portfolio into some stock that someone recommended.”

People in the early stages of the disease are also vulnerable to scams and fraud, added Nicholas, who was not involved in the New York Fed research. In a paper published last year, she and several co-authors found that people likely to develop dementia saw their household wealth decline in the decade before diagnosis.

The problems are likely to only grow as the American population ages and more people develop dementia. The New York Fed study estimates that roughly 600,000 delinquencies will occur over the next decade as a result of undiagnosed memory disorders.

That probably understates the impact, the researchers argue. Their data includes only issues that show up on credit reports, such as late payments, not the much broader array of financial impacts that the diseases can cause. Wilbert van der Klaauw, a New York Fed economist who is another of the study’s authors, said that after his mother was diagnosed with Alzheimer’s, his family discovered parking tickets and traffic violations that she had hidden from them.

“If anything, this is kind of an underestimate of the kind of financial difficulties people can experience,” he said.

Shortly before he was diagnosed with Alzheimer’s, Jay Reinstein bought a BMW he could not afford.

“I went into a showroom, and I came home with a BMW,” he said. “My wife was not thrilled.”

At the time, Reinstein had recently retired as assistant city manager for Fayetteville, N.C. He had been noticing memory issues for years but dismissed them as a result of his demanding job. Only after his diagnosis did he learn that friends and colleagues had also noticed the changes but had said nothing.

Reinstein, 63, is fortunate, he added. He has a government pension and a wife who can keep an eye on his spending. But for those with fewer resources, financial decisions made in the years before diagnosis can have severe consequences, leaving them without money at the time when they will need it most. The authors of the New York Fed study noted that the financial effects they see predate most of the costs associated with the disease, such as the need for long-term care.

The study expands on past research in part through its sheer scale: Researchers had access to health and financial data on nearly 2.5 million older Americans with chronic health conditions, roughly 500,000 of whom were diagnosed with Alzheimer’s or related disorders. (The records were anonymized, allowing researchers to combine the two sets of data without having access to identifying details on the individual patients.)

The large amount of data allowed researchers to slice it more finely than in past studies, looking at the impact of race, sex, household size and other variables. Black people, for example, were more than twice as likely as white people to have financial problems before diagnosis, perhaps because they had fewer resources to begin with, and because Black patients are often diagnosed later in the course of the disease.

The researchers hoped that the data could eventually allow them to develop a predictive algorithm that could flag people who might be suffering from impaired financial decision-making associated with Alzheimer’s disease — although they stressed that there were unresolved questions about who would have access to such information and how it would be used.

Until then, the researchers said, their findings should be a warning to older Americans and their families that they should prepare for the possibility of a Alzheimer’s diagnosis. That could mean taking steps such as granting a trusted person financial power of attorney or simply paying attention to signs that someone might be behaving uncharacteristically.

Nicholas agreed.

“We should be thinking about the possibility of financial difficulties linked to a disease we don’t even know we have,” she said. “Knowing that, people should be on the lookout for these symptoms among friends and family members.”