Sit her down and tell her that she can't waste her resources like this. Tell her that it's her money to do with as she sees fit, but that she's NEVER going to get any back and when she needs it (use medical examples) it will be gone, stolen from her. Then tell her, if you must, that you'll have her judged unable to take care of her finances if it doesn't stop -- and if necessary, do so.

She probably thinks that she'll get a big payoff that she can leave for her kids and grandkids (if any).