OBJECTIVE: The purpose of the study was to examine formal care costs (direct medical costs) and informal care costs (non-reimbursed caregiver time) of Alzheimer s patients enrolled in an integrated managed care organization (MCO). METHODS: The MCO provided medical and prescription claims data for a one-year period for 80 patients diagnosed with Alzheimer s disease (AD) or related dementia. Severity measurements were made at baseline, month 6, and month 12. Caregivers provided informal care information three times throughout the year. RESULTS: The mean annual cost of care for these AD patients was $36,850.94 (sd=18,356.62). There was a mean of $26,434.12 (sd=20,239.38) for formal care costs (71.7%), and a mean of $10,416.82 (sd=8,962.07) for informal care costs (28.3%). Costs were calculated for patients with mild, moderate, and severe AD, as well as for patients who lived in the community, in institutions, and moved from community to institution. Mean annual costs were approximately 1.8 and 1.2 times higher for severe patients than for mild and moderate patients, respectively. Mean annual formal care costs were 14.3 times higher for institutionalized patients than for those in the community. Mean annual informal costs were 2.2 times higher for community patients than institutionalized patients. CONCLUSIONS: Through detailed cost analyses, managed care decision-makers can be better informed about the current care being provided for AD patients. The total annual direct medical cost was $2.1 million for these 80 managed care patients with AD. With the increasing prevalence of AD and the higher costs associated with the advancement of the disease, managed care would benefit by providing treatment that could delay or reverse the progression of AD.