This article discusses two approaches to costing disease and summarizes an incidence-based costing of schizophrenia using 1975 data. Because the presentation of schizophrenia may have changed in the last 16 years, the effects of three possible changes--a reduction in incidence, a transfer to treatment in the community, and an improvement in prognosis--are all entered into the 1975 model and the changes in costs are noted. The decrease in costs is greatest presuming a reduction in incidence, moderate given an improvement in prognosis, and relatively minor given the economies in direct treatment costs likely to follow a transfer to community treatment. Nevertheless, because community treatment might also be associated with an improvement in prognosis, the social issues for medicine implicit in the transfer from hospital to community treatment are discussed.