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The Financial Symptoms of Dementia: When Missed Payments Could Be a Cognitive Health Red Flag

By | February 18th, 2021

Studying the intersection of dementia and finance could us help better identify and mitigate the financial vulnerability that tends to accompany cognitive decline. Experts including wealth planner Angie O’Leary, health economist Lauren Hersch Nicholas, and Alzheimer’s researcher Dr. Jason Karlawish help us understand the money-related red flags of dementia in everyday life.

Angie O’Leary’s late father-in-law usually had his finances squared away and paperwork well-organized. When O’Leary and her husband walked into the home he shared with his wife they found bills and statements covering the open surfaces of the house. They thought something was surely wrong. He was diagnosed with Alzheimer’s shortly after. 

“He showed early warning signs of dementia that we should have picked up sooner,” O’Leary, head of wealth planning at Royal Bank of Canada Wealth Management-U.S., told Being Patient. “They were very financial-related: bills not paid, lots of stuff piling up, bills paid twice, filing the wrong tax returns, a whole bunch of those types of indicators.” 

Indeed, as the medical adage goes, the first place to look for dementia is in the checkbook, said Lauren Hersch Nicholas, an associate professor of public health at the University of Colorado. Financial missteps in dementia and aging can snowball into devastating consequences, draining people’s life savings and sinking them into debt. But these financial missteps can also be among the first clues of cognitive impairment.

New research shows that financial problems can emerge long before a dementia diagnosis and persist for years after, raising concerns that people’s inability to manage day-to-day financial tasks may also increase their risk of falling victim to financial fraud. 

According to Nicholas, people’s judgement of risks can become impaired in dementia, reducing their ability to make sound financial decisions. Other common symptoms like problems with memory and attention also often affect people’s financial management skills.

“The early stage of the disease changes your risk perception, [and] makes you unable to determine what’s a good investment or what’s a good idea for your financial situation,” Nicholas told Being Patient.

Spotting the Financial Red Flags of Dementia

While unpaid bills and taxes, and accumulating mail could all be symptoms of diminishing capacity, O’Leary said other warning signs of dementia include repetitive questions about banking information, frequent changes of internet passwords, and the need for repeated explanations for simple financial topics. 

Unexpected changes in people’s financial relationships can be another red flag. People may fire their financial advisor out of left field, develop newfound interest in a phone solicitor, or make new or unusual donations. 

According to O’Leary, an abrupt shift in people’s proclivity for risk can also be a concern. 

“There could be a change in that, all of a sudden, they’re interested in something riskier: GameStop, for example, because they’ve seen it on the news,” she said in reference to the recent stock surge of the gaming retailer, which was sparked by a Reddit message board, “or vice versa, all of a sudden their risk appetite is completely gone when it was well represented before.”

Increased trading or spending that doesn’t fall within usual patterns could also be telltale signs. 

Recognizing the Magnitude of Financial Mismanagement in Dementia

Past research has shown the link between dementia and difficulty in managing finances, but the pervasiveness and magnitude of financial errors related to the disease remained unclear. 

Nicholas saw a need for more quantitatively rigorous research in the prevalence and extent of financial errors related to dementia as studies have typically relied on small samples and surveys.

So, in a recent study published in JAMA Internal Medicine, Nicholas and colleagues sought to fill the gap in research by analyzing 20 years of data that included more than 80,000 people, linking Medicare claims to credit report data. 

The researchers found that people with dementia were more likely to miss bill payments up to six years before diagnosis, compared to those never diagnosed. They also had a higher likelihood of developing subprime credit scores two and a half years before diagnosis. For at least three and a half years after a dementia diagnosis, they remained at heightened risk of missed bill payments and subprime credit scores. Financial mismanagement was also more common and occurred earlier among those living in low education areas, compared to people in areas of higher education.  

Dr. Jason Karlawish, professor of medicine at the University of Pennsylvania who was not involved in the study, said the research provides empirical evidence for what experts in the field have long thought: Among people’s day-to-day routine, financial management can be one of the first casualties of cognitive decline. 

“It was a proof of concept that I think everyone who works in the space of Alzheimer’s disease and related disorders suspected, namely that one of the earliest activities of daily living to be affected by cognitive impairment is managing finances,” Dr. Karlawish told Being Patient. “And it occurs even before people are typically labeled in the healthcare system with Alzheimer’s disease or related disorders.” 

He added that the recent study breaks new ground as research in the predictors of a dementia diagnosis typically relies on measures like performance on cognitive tests, biomarkers from the blood, spinal fluid and brain scans, and interviews with informants. 

“This study uses an entirely novel and highly naturalistic set of data, namely people’s credit reports. That was very innovative and very provocative,” he said. “Real world financial behaviors that are gathered as part of routine business practice can predict that someone is going to suffer disabling cognitive impairment down the road.” 

According to Dr. Karlawish, more research is needed to validate the findings of the study and to examine people’s performance on other financial tasks such as paying utility bills, banking and investments. The sample was also limited to those who lived alone (the majority of Medicare beneficiaries with dementia live alone), he wrote in an accompanying editorial. And, it remains to be seen whether study’s findings would hold up in cases where the person with dementia has a partner who could intervene. 

Meanwhile, researchers urged policymakers and financial institutions to play a larger role in detecting patterns of unusual financial transactions related to cognitive impairment and preventing people from straying down the slippery slope of financial mishaps.

“More research always needs to be done, but truly, it is time to act,” Dr. Karlawish wrote. “The financial services industry, their champions both in Congress and out, and their regulators should be part of the solution of the U.S.’s Alzheimer problem.”

Nicholas added, “We really need to think carefully about how to put policy in place that both protects autonomy, but also prevents some of these catastrophic mistakes from happening.”

The article is part I of Being Patient series about the financial burdens of dementia. Stayed tuned for part II and part III for more on the financial exploitation of older adults and preparing aging America to confront the costs of dementia care.

Contact Nicholas Chan at nicholas@beingpatient.com

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