OBJECTIVES: The aims of this study are to estimate the direct medical costs and utilization rate of psychiatric services among elder people (aged 65 and over) in Taiwan, and to evaluate the costs of the top five geriatric mental disorders. METHODS: This study was based on the National Health Insurance Research Database of Taiwan’s National Health Insurance (NHI) program. Detailed data was extracted from the Psychiatric Inpatient Medical Claim (PIMC) dataset. The PIMC included 96,013 psychiatric inpatients’ data from 1996 to 2007. RESULTS: From 2002 through 2007, the sample included 15,109 (16% of all psychiatric inpatients) geropsychiatric inpatients. The total admissions were 19,137 and the hospitalization rate was 1.27 per person per year. The average LOS (length of stay) was 35.05 days (acute bed), 78.71 days (chronic bed), and average ambulatory visits were 9.48 per patient per year. The mean total hospital-related cost was USD 7.2 million and the mean cost for each patient was USD 2828 per year. The top five ranking mental disorders and their average costs per year were dementia (987 patients, USD 2.6 million), mood disorders (616, USD 1.6), schizophrenia (276, USD 1.0), other organic brain disorders (254, USD 0.6), and delusional disorders (149, USD 0.9). CONCLUSIONS: From 2002 through 2007, the direct medical costs and utilization rate of psychiatric facilities by geropsychiatric inpatients increased annually in Taiwan. The direct medical costs of dementia, mood disorder and schizophrenia were significantly higher than those of the other mental disorders. The direct medical expenditures estimated in this study have implications for assessment of financial impact on future insurance budget planning in Taiwan.