OBJECTIVES: Alcoholism and alcohol abuse are widespread. The economic consequences of these conditions in a managed-care setting are largely unknown. METHODS: The direct economic burden of alcoholism and alcohol abuse was estimated by multiplying numbers of health care encounters and total health care expenditures for alcohol-related conditions by corresponding alcohol-attributable (i.e., etiologic) fractions (AAFs). Alcohol-related conditions—including alcoholism and alcoholic disorders, alcohol-related diseases, and alcohol-related injuries—and AAFs were based on a published taxonomy developed for the US Centers for Disease Control and Prevention (CDC). Encounters and expenditures for the treatment of alcohol-related conditions were estimated using 2004 health care claims data for a random sample of 4 million managed-care plan members. Direct economic burden was estimated on an overall basis and by setting of care, for all members and by age and sex. RESULTS: Alcohol-attributable expenditures totaled $216.2 million in 2004, or $5.4 million per 100,000 plan members, representing 3% of total health care expenditures during the year. Alcohol-related diseases represented 55% of alcohol-attributable expenditures; treatment of alcoholism and alcoholic disorders constituted 38%. Hospitalizations represented 61% of attributable expenditures, followed by hospital outpatient visits (13%), physician office visits (10%), and emergency room visits (5%). Expenditures (per 100,000 plan members) were 1.6 times higher for men than women, and increased with age. CONCLUSION: The economic burden of alcohol-attributable expenditures in US managed-care settings is substantial. Interventions directed at the problem of alcoholism and alcohol abuse could yield considerable cost offsets.