A report from the National Audit Office (NAO) into dementia care has revealed that earlier diagnosis and better support could save thousands of pounds.
The NAO say that services are not delivering dementia patients and their families "value for money".
Neither are GPs and nurses making use of early interventions that would improve the quality of life of people with dementia.
The report found that less than two thirds of GPs felt it was important to actively search for early signs of dementia.
On average, GPs only scored 47% in dementia knowledge tests and most said their confidence in diagnosing dementia had fallen in the last two years
The NAO says that a clear method of diagnosing dementia could reduce the number and length of hospital stays and delay the need to admit people for long-term care.
Neil Hunt chief executive of the Alzheimer's Society says: "It is absolutely crucial that people with dementia get diagnosed as early as possible so that they and their families get the information and support they need.
"We must develop health and social care services that can respond to the challenge of dementia.
"A lot of money is being spent on inadequate dementia care – we need to plan now to make better use of resources."
More than 700,000 people in the UK have dementia, and this is set to rise to more than a million by 2025.