OBJECTIVES: Lyme disease is an increasingly common condition in the United States and temperate regions of Europe and Asia. The reported cases have increased 25 fold since 1982. Recently two vaccines have been developed. Decisions about the cost effectiveness require consistent cost estimates. The objective of this study is to identify the costs of diagnosis, treatment, treatment failure, and late diagnosis in a large HMO population located in an endemic area. Prior studies have not included the worried well who are tested but do not receive treatment. METHODS: This study is a matched retrospective cohort study. 8,017 individuals tested or diagnosed with LD was matched by age, gender, and zip code with a control population. Standardized HMO and pharmacy costs were gathered from the HMO claims system. Chronic disease status was controlled using the Chronic Disease Score. Costs were assessed for six weeks prior to first LD contact and six weeks following first LD contact. Late-effect and treatment failures were assessed separately for longer post-contact windows. RESULTS: The mean 12 week per capita medical direct expense for LD cases is 4.1 times higher than for the control group. The cost difference is highly significant (p<0.001). Pharmacy expense is 1.77 times greater (p<0.001). CONCLUSIONS: The cost effectiveness of LD vaccines is dependent on the identifying the cost of both treatment and anxiety caused by the potential of tick-borne infection. The costs differences illustrated in this study emphasize the importance of both true positives and the “worried-well” in assessing the total cost of LD to health insurance sponsors.