OBJECTIVES: The aim of this study was to estimate the direct and indirect medical costs of treating Alzheimer' disease (AD) in patients older than 60 years for the years 2000-2002 in Taiwan. METHODS: The direct medical costs of treating AD patients older than 60 years were calculated using medical claim data from the National Health Insurance database. The indirect medical costs were using the data reported by local study on the family cost for patients with AD. The correlation of patients' characteristics, included gender and age, to the increase of direct medical costs for treating AD were analyzed by ANOVA, and linear regressions. RESULTS: The direct medical costs for 2000 to 2002 were approximately US$ 1.3 million, $2.7 million, and $ 3.6 million. The proportion of the direct costs spent on outpatient care were $933,612.80 (71%), $1,482,561 (54%), and $1,904,954.30 (53%) in 2000, 2001, 2002. It represented % of the total public health care expenditure in Taiwan. In contrast, inpatient care expenditure increased, with costs totaling $1,310,528 (29%), $2,750,585 (46%), and $3,602,911 (47%) in 2000, 2001, and 2002. The indirect medical cost of the disease were total US$ 3810.086 from the year 2000 to 2002, included nursing health care and home care cost. We estimated a total annual medical cost of billion for AD patients older than 60 years in Taiwan. The number of patients was increased with aging and female patients were more than male patients both in out-patients and in-patients department. The direct cost increased gradually in the studied years was not correlated to the gender of patients but with the increase of older population. CONCLUSIONS: The direct medical costs of AD are increasing annually as the older population grows. The estimation of costs presented has implications for future economic evaluation of treatments and relocation of medical resource for AD in Taiwan.