More than 320,000 of the 400,000 people living in care homes in England, Wales and Northern Ireland now have dementia or severe memory problems, the Alzheimer's Society charity estimates.
It said the figure was almost 30% higher than previous estimates because of the rise in the ageing population and improvements in data collection.
Of 2,000 adults surveyed, 70% said they would be scared about going to a home.
Another two-thirds felt the sector was not doing enough to tackle abuse.
And just 41% of 1,100 family members and carers surveyed thought their loved ones' quality of life was good.
Alzheimer's Society chief executive Jeremy Hughes said: "Society has such low expectation of care homes that people are settling for average.
"Throughout our lives we demand the best for ourselves and our children. Why do we expect less for our parents?
"We need government and care homes to work together to lift up expectations so people know they have the right to demand the best."
David Rogers, of the Local Government Association, which represents councils, said: "This report shows the lack of confidence in a care system which is buckling under the weight of rapidly growing demand and years of underfunding.
"Local authorities want to offer a service which goes beyond a basic level of care but this is becoming increasingly difficult as our population ages, costs climb and the already significant funding shortfall becomes even more severe."
Around one in three people over the age of 65 will develop dementia in their lifetime.
It is estimated that there are around 800,000 people in the UK who have dementia, but many have not yet been diagnosed.
The number of people with dementia is increasing because people are living longer.
By 2021 the number of people in the UK with dementia will have risen to almost 950,000, experts believe.
The government is looking to improve dementia care by building greater awareness and understanding of the condition, as well as pumping more money into research to find new treatments and hopefully a cure.
In October 2012, Health Secretary Jeremy Hunt announced dedicated funding of up to £50m to NHS trusts and local authorities to help tailor hospitals and care homes to the needs of people with dementia.
There are around 20,000 care homes in the UK.