Background: Skin diseases and their complications are a significant burden on the nation, both in terms of acute and chronic morbidities and their related expenditures for care. Because accurately calculating the cost of skin disease has proven difficult in the past, we present here multiple comparative techniques allowing a more expanded approach to estimating the overall economic burden. Objectives: Our aims were to (1) determine the economic burden of primary diseases falling within the realm of skin disease, as defined by modern clinical disease classification schemes and (2) identify the specific contribution of each component of costs to the overall expense. Methods: Costs were taken as the sum of several factors, divided into direct and indirect health care costs. The direct costs included inpatient hospital costs, ambulatory visit costs (further divided into physician's office visits, outpatient department visits, and emergency department visits), prescription drug costs, and self-care/over-the-counter drug costs. Indirect costs were calculated as the outlay of days of work lost because of skin diseases. Results: The economic burden of skin disease in the United States is large, estimated at approximately $35.9 billion for 1997, including $19.8 billion (54%) in ambulatory care costs; $7.2 billion (20.2%) in hospital inpatient charges; $3.0 billion (8.2%) in prescription drug costs; $4.3 billion (11.7%) in over-the-counter preparations; and $1.6 billion (6.0%) in indirect costs attributable to lost workdays. Conclusions: Our determination of the economic burden of skin care in the United States surpasses past estimates several-fold, and the model presented for calculating cost of illness allows for tracking changes in national expenses for skin care in future studies. The amount of estimated resources devoted to skin disease management is far more than required to treat conditions such as urinary incontinence ($16 billion) and hypertension ($23 billion), but far less than required to treat musculoskeletal conditions ($193 billion). (J Am Acad Dermatol 2003;48:592-9.)