Background There has been no published study that considers actual cos
ts in a representative sample of people aged greater than or equal to
65 years. The present study describes the financial cost of formal com
munity services for elderly people with dementia, depression, anxiety
disorders or physical disability. Method Psychiatric morbidity, physic
al disability and services received were assessed by standardised ques
tionnaire in randomly selected Islington enumeration districts. Subjec
ts were interviewed at home (n=700). Results Dementia was the most exp
ensive disorder per sufferer in terms of formal services. Those with d
epression were also high users of health services. Despite presenting
to health services, 90% were not treated with appropriate drugs. In co
ntrast, social services were received by people who were activity-limi
ted or with dementia. The highest service cost for the population as a
whole was for the physically disabled. In multivariate analysis the s
ignificant predictors of high service costs were living alone, being p
hysically ill, depression, dementia and increasing age. Conclusions Fa
ilure to detect and treat depression and the anxiety disorders in olde
r people, despite their presentation to medical services, may have maj
or economic consequences as well as contributing to individual sufferi
ng.