Alzheimer's disease (AD) has the potential to become a major health concern and associated health care costs may become a significant economic burden on society. The aim of this study was to estimate the direct medical costs attributable to AD in patients aged ≥60 years in Taiwan from 2000 through 2002 and to explore the correlation of these costs with patients' age and sex. This study was based on the National Health Insurance Research Database of Taiwan's National Health Insurance (NHI) program. The NHI program insures >98% of the 23 million inhabitants of Taiwan. Detailed data were extracted from a random sample of 0.2% of inpatient and 5% of outpatient recipients with AD (International Classification of Diseases, Ninth Revision, Clinical Modification diagnosis code 331.0) who were aged ≥60 years and who received inpatient or outpatient services with claims from January 1, 2000, to December 31, 2002. Duplicate charges for a specific patient and diagnoses of other types of dementia were excluded from this study. A total of 69,780 patients were found to have a diagnosis of AD. The direct medical costs for outpatients were estimated at US $1.2 million in 2000, US $1.9 million in 2001, and US $2.3 million in 2002; the costs for inpatient care were estimated at US $670,000 in 2000, US $2.4 million in 2001, and US $3.2 million in 2002. The total direct medical costs were estimated at US $1.86 million in 2000, US $4.24 million in 2001, and US $5.48 million in 2002. The increase of total direct medical costs was not significantly correlated with patients' age or sex. From 2000 through 2002, the direct medical costs of AD increased annually in Taiwan among patients with AD aged ≥60 years. No significant correlation was found between increased total direct medical costs and sex or age. The cost estimate presented here has implications for future decision making about reallocating medical resources for treating AD in Taiwan.