Many countries in the Western world are facing great challenges posed by an ageing population. Since cognitive impairments and the prevalence of dementia increases with age, we can expect an increasing number of older people in need of care. However, severe problems with such care are already reported by researchers as well as in the mass media. The aim of this paper is to discuss how the identity confusion among older people suffering from dementia might influence relationships and the staff's behaviour, and in that sense, be part of the care problems reported. Three studies carried out between 1993 and 2003 are introduced aimed at illustrating the severe care problems identified. The interaction between the residents and the staff is focused on and discussed from a psychodynamic viewpoint. Data show that the caregivers also become confused and express a need of affirmation comparable with that of the older people suffering from dementia. That is, even the caregivers' behaviour seems to be influenced by an identity‐preserving ambition similar to the one of the dementia sufferers, and this might explain some of the problems in this form of care.