OBJECTIVES: This analysis examines the effect of mental health on the healthcare cost of those suffering from diseases of the heart. METHODS: We examined Tennessee Medicare reimbursement files for 2002 (inpatient, outpatient, and physicians) for elderly with diseases of the heart (ICD-9 diagnosis; n=294,322). The sample included blacks (9.8%), females (57.8%), and those with a mental health diagnosis (15.16%; n=44,605). Analyses of variance and regression (controlling for age, sex, and race) compared the cost differences between those with and without mental health diagnosis. RESULTS: The total healthcare cost per patient for those with a mental disorder was significantly higher than for those without a mental disorder ($35,865 vs. 18,863, p<.01; a difference of $17,002 per patient). After controlling for age, race, and sex, the average cost per patient reduced by $4,865, that is, from $35,865 to $31,000. Approximately 8% of the total health cost was for treatment of mental disorders. Further, among those having both diseases of the heart and mental disorder, the total health cost was significantly higher for males than females ($40,762 vs. $33,865), and for blacks than whites ($45,855 vs. $34,621). CONCLUSION: Healthcare cost is significantly higher among heart disease patients with a mental disorder. A significant saving of $4,865 per patient leading to cost saving of 21.7 million could be attained ($4,865 x 44,605 patients = $21.7 million) through a special management team that provided treatment parity across the board.