14: Direct and indirect costs of dementia to the Australian economy

There is no single source of data to estimate total health and aged care expenditure due to dementia. Most reports on the economic cost of dementia to the Australian community draw heavily on AIHW disease expenditure studies, which describe the activities and characteristics of Australia’s health care system in terms of estimated expenditure for different demographic groups in the population, and expenditure relating to different groups of diseases (based on Australian Burden of Disease Study conditions) (AIHW 2020). The latest expenditure estimates for 2018–19 were derived by combining information from a wide range of sources, including the National Hospital Morbidity Database, Medicare Benefits Schedule (MBS), Pharmaceutical Benefits Scheme (PBS), Private Hospital Data Bureau Collection, and the AIHW Health Expenditure Database. Due to data availability, allocated spending is skewed towards activities in hospitals (AIHW 2021).

Disease expenditure studies can use different data and estimation methodologies over time, which creates challenges reporting changes in health expenditure attributable to dementia over time (AIHW 2020). The analysis of disease expenditure is complex and resource intensive, which limits the frequency and timeliness of the estimates. Dementia in Australia (AIHW 2023) reports health and aged care expenditure estimates that are directly attributable to dementia to avoid including expenditure related to other conditions. Data limitations mean that expenditure estimates exclude costs such as state and territory expenditure on aged care, government payments to support people with dementia and their carers, and indirect expenditure (such as lost wages and productivity) – therefore, the expenditure estimates should be considered conservative (AIHW 2023).

Australia’s response to dementia requires regular monitoring and reporting of both the direct costs and the substantial indirect costs, such as informal care, lost productivity, and income support provided to people with dementia and/or their carers. To date, reporting of indirect costs of dementia has been on an ad-hoc basis. The National Centre for Social and Economic Modelling (NATSEM) has recently estimated the economic and societal cost of only one type of dementia (Alzheimer’s disease) in Australia (Brown et al. 2022). Consistent investment in estimating both the direct and indirect costs of dementia in Australia is needed, particularly with future changes in dementia policies and program/service delivery.

Proposed data improvement activities

There are 2 main activities proposed to improve data on direct and indirect costs of dementia to the Australian economy. These include activities to:

  • expand existing national reporting on the direct expenditure of dementia
  • undertake updates on the indirect costs of dementia in Australia.

Each activity provides information on the intended outcome, priority rating, level of investment required, timeframe for completion of the activity and who is responsible for undertaking the activity.