Higher medical costs incurred by persons with mental disorders was assessed by comparing users and non-users of mental health services in their use of medical (non-mental health) services. Insurance claims data for 4.8 million persons enrolled in the Federal Employees Plan in 1978 were examined. Policy-related recommendations include the need for coordinated mental and physical health care in primary care settings. In particular, the physical health problems of patients in mental health settings should not be ignored as these may cause or exacerbate distress and reduce the effectiveness of mental health treatment. © 1993 Human Sciences Press, Inc.