New research suggests that people often start falling behind on mortgages, credit card payments and other financial obligations long before they develop dementia.
A team of economists and health experts from the Federal Reserve Bank of New York and Georgetown University combined Medicare records with data from credit reporting company Equifax to study how people's borrowing behavior changed in the years before and after a diagnosis of Alzheimer's or similar diseases.
Their findings were shocking: the credit scores of people who later developed dementia began to plummet long before the disease was officially diagnosed. A year before diagnosis, these people were 17.2% more likely to have missed a mortgage payment and 34.3% more likely to have missed a credit card payment than before the onset of the disease. The problems started even earlier: The study found evidence that people were falling behind on their debts five years before diagnosis.
“The results are striking both in their clarity and their consistency,” said Georgetown University economist Carol Roan Gressenz, one of the study's authors. “Credit scores and delinquencies consistently worsen as diagnosis approaches, literally mirroring the changes in cognitive decline that we are observing,” Gressenz said.
“This study adds to a growing body of research demonstrating what many Alzheimer's patients and their families already know: their ability to make decisions, including financial ones, can begin to decline long before a diagnosis is made or even suspected. As people begin to experience cognitive decline, they may miss payments, make impulse purchases, or put their money into risky investments that they would never have considered before they got the disease.”
“Not only do people become more forgetful, but their risk tolerance changes,” says Lauren Hirsch Nicholas, a professor at the University of Colorado School of Medicine who studies the impact of dementia on people's finances. “Shifting your diversified financial portfolio into a stock someone recommended may suddenly seem like a good move.”
People in the early stages of dementia are also more susceptible to fraud and cheating, added Dr. Nicholas, who was not involved in the New York Fed study. In a paper published last year, he and several co-authors found that people more likely to develop dementia had lower household wealth in the 10 years before their diagnosis.
The problem is likely to grow as the U.S. population ages and more people develop dementia: A New York Federal Reserve study estimates that undiagnosed memory problems will cause 600,000 delinquencies over the next decade.
The researchers argue that's probably an underestimate of the impact: Their data only included problems that show up on credit reports, such as late payments, and not the broader economic effects the disease may cause. Wilbert van der Klaauw, an economist at the New York Federal Reserve and the other author of the study, said that after his mother was diagnosed with Alzheimer's, her family discovered parking tickets and traffic violations that she had hidden.
“If anything, this is an underestimation of the economic hardship people may experience,” he said.
Shortly before Jay Reinstein was diagnosed with Alzheimer's, he bought a BMW he couldn't afford.
“I went to the showroom and bought a BMW,” he says. “My wife wasn't happy.”
At the time, Reinstein had recently retired as deputy mayor of Fayetteville, North Carolina. He had been aware of his memory problems for years but blamed them on his demanding job. It wasn't until he was diagnosed that he realized that friends and coworkers had also noticed the changes but said nothing.
Reinstein, 63, is lucky, he added: He has a government pension and a wife who helps keep an eye on his spending. But for people with fewer assets, financial decisions made in the years before a diagnosis can have serious consequences, leaving them without money when they need it most. The authors of the New York Fed study noted that the financial impacts they saw occurred before most of the costs associated with the disease, such as the need for long-term care.
The study also extends previous work because of its size: The researchers accessed health and financial data on about 2.5 million older Americans with chronic health conditions, about 500,000 of whom have been diagnosed with Alzheimer's or a related disease. (The records were anonymized, allowing the researchers to combine the two data sets without accessing details that could identify individual patients.)
The sheer volume of data allowed the researchers to analyze it in more detail than previous studies, examining the effects of race, sex, household size, and other variables. For example, black people were more than twice as likely as white people to have financial problems before diagnosis, which may be because black people have fewer assets to begin with and because black patients are more likely to be diagnosed later in the disease process.
The researchers hope that this data will eventually allow them to develop predictive algorithms that can warn people who may be suffering from Alzheimer's-related declines in financial decision-making ability, but they stressed that there are open questions about who would have access to such information and how it would be used.
Until then, the researchers say, the findings should serve as a warning to older Americans and their families to prepare for the possibility of an Alzheimer's diagnosis. That could mean taking steps like giving a trusted person power of attorney for managing their finances, or simply paying attention to signs that someone is behaving differently than usual.
Dr. Nicholas agreed.
“We need to think about the financial hardships that a disease we don't even know we have could have,” she said. “And with that in mind, people should be on the lookout for friends and family who may be experiencing these symptoms.”
Pam Bellack Contributed report.
