OBJECTIVES: Osteoarthritis commonly co-occurs with depression leading to poor health outcomes and high economic burden. The objective was to examine the contributing factors to excess total healthcare expenditures associated with depression among those with osteoarthritis using a post-regression linear decomposition approach. METHODS: Data were derived from the 2010 Medical Expenditure Panel Survey (MEPS) and self-reported osteoarthritis and depression were identified. Chi-square tests and ordinary least square regressions (OLS) on log-transformed expenditures were used to determine the association between depression status and healthcare expenditures after controlling for predisposing (gender, race, and age), enabling (marital status, education, employment, poverty status, insurance coverage, and usual source of care), need (perceived physical and mental health, anxiety, presence of cardiovascular conditions, and other chronic conditions), lifestyle (Body-Mass index, exercise, and smoking status), and external environment factors (metro versus non-metro).   Post-regression linear decomposition technique was used to estimate the relative contribution of individual-level variables to the excess expenditures associated with depression and osteoarthritis compared to those without depression.   RESULTS: Among individuals with osteoarthritis 20.6% reported having depression. The average total healthcare expenditures were $13,684 for those with depression compared to $9,284 among those without depression. OLS regression on log-transformed total healthcare expenditures revealed that those with depression had 38.8% greater healthcare expenditures (p < 0.001) compared to adults without depression. Post-regression linear decomposition analysis indicated that nearly 50% of the difference in average healthcare expenditures among adults with and without depression can be explained by differences in individual-level characteristics between the two groups. These differences may be attributable mainly to the need factors such as perceived health status, anxiety, presence of cardiovascular conditions, and other chronic conditions. CONCLUSIONS: Results from the study suggest that excess healthcare expenditures associated with depression may be reduced by improving the co-management of chronic physical and mental health conditions.