Dementia Care Costs Rise as Workforce Shrinks and Medicaid Funding Cuts Take Effect

The US healthcare market faces a converging set of pressures as the population ages and federal funding structures shift. The combination of rising case numbers and a thinning workforce is set to alter the cost dynamics of long-term care.

Demand for dementia care is projected to double over the next three decades. A 2024 study in Jama estimated that annual US diagnoses will rise from 514,000 in 2020 to 1 million by 2060. Global figures in Jama Neurology place new annual cases at 11.4 million in 2023, with a forecast of 24.7 million by 2050. Researchers attribute this growth primarily to increased life expectancy, which moves more individuals into the age brackets where dementia is most prevalent. The expanding Hispanic population also contributes to the projected rise. That demographic group nearly doubled between 2000 and 2024, and the Alzheimer's Association indicates Hispanic individuals are 1.5 times more likely to develop dementia than white individuals.

The supply of labor required to meet this demand is already constrained. A 2024 report from the American Health Care Association found that nearly all nursing facilities struggled to recruit staff. Two-thirds of those facilities identified a lack of qualified candidates as the primary barrier. Approximately half of these facilities reported limiting new admissions due to staffing levels. The Center for American Project forecasts that demand for nursing assistants will increase by 48% and demand for home health aides will rise by 42% between 2020 and 2035. Wage data from the Bureau of Labor Statistics for May 2025 shows median pay for nursing assistants in assisted living and home healthcare remained under $19 per hour. Home health aides earned a median wage of $17 per hour.

Specialized medical staffing presents a similar challenge. The number of geriatricians in the US declined from 10,270 in 2000 to 7,413 in 2022, according to a Jama report. Geriatrics is among the lower-paid medical specialties, a factor assistant professor Jordan Weiss of NYU Langone cites as a reason for the workforce contraction. Regina Shih, an epidemiology professor at Emory University, noted that retention in direct care roles is low because the work is difficult and cannot be replaced by artificial intelligence.

State and federal fiscal policies are shaping the financial environment for care. A KFF survey found that almost half of US states offered incentive payments in 2025 to recruit or retain Medicaid home care workers. South Carolina implemented a loan forgiveness program for physicians completing geriatrics or geriatric psychiatry fellowships who practice in the state for at least five years. These state efforts occur alongside the One Big Beautiful Bill Act, passed in 2025, which includes nearly $1 trillion in Medicaid cuts over 10 years. KFF reports that Medicaid funds more than half of US long-term care spending.

Medical advancements are introducing new cost variables. The FDA has approved Kisunla and Leqembi, two drugs that modestly slow cognitive decline in early Alzheimer's patients. Blood tests for diagnosis and risk prediction are also available. Julie Zissimopoulos, a professor at the University of Southern California, stated that these advances may improve patient outcomes but will be costly for the healthcare system.

Jordan Weiss emphasized that building a system capable of delivering current care is as important as waiting for a cure. He pointed to cardiovascular health and physical activity as areas where risk reduction is possible. The financial model for dementia care must now account for a larger patient base, a smaller workforce, and a reduced federal reimbursement stream.