How do you deal with hallucinations where the dementia patient thinks that his doctor called and told him he is dying when he's not dying?

My loved one was just diagnosed with diabetes, and he is taking insulin. He has a kidney transplant. This morning he told me his doctor called and said he can't keep taking the insulin because it will kill his kidney. I checked with his doctor and he said he did not talk to him, and that insulin will not hurt his kidney.

I know the general rule is just to go along with a dementia patients hallucinations, but should I leave him in this distressed state truly believing he is going to die?

Is it ever advised to tell a dementia patient that he is suffering from hallucinations? His doctor says there is medication he can take to stop him from having hallucinations. Since he still has significant lucid periods, he will no doubt ask me what the medication is for. Should I lie to him?

Or would the best approach be to have the doctor bring up the subject of hallucinations at his next appointment?

Thank you.