The long-term costs of care and the effects of the length of the initial hospital stay on costs and effectiveness of the care of children with Type 1 diabetes are largely unexplored. A randomized prospective study was carried out wherein we shortened the length of the initial hospital stay from 23 +/- 4 days to 9 +/- 3 days in half of 61 consecutive children with newly diagnosed Type 1 diabetes. Metabolic control, psychosocial adjustment, and direct and indirect costs of care were compared during a 2-year follow-up. Having confirmed similar metabolic and psychosocial outcomes, we now report the costs of the two treatment modes. The costs of care of a child with Type 1 diabetes totalled 10,834 pounds and 6928 pounds in the long-term and short-term alternatives, respectively, during the 2-year follow-up (p < 0.001, one-way ANOVA). Direct costs accounted for 83% of the expenses in the long-term and 82% of the expenses in the short-term group; 73% and 56% of the direct and 78% and 72% of the indirect costs were incurred during the first month in the two groups, respectively. The first month's expenses were twice as high in the long-term than in the short-term group. Consumed hospital days and the parents' lost work time were the largest cost items in both groups. There were no significant differences in the cost items during the following 23 months. We conclude that the greater part of both the direct and the indirect expenditures were associated with the initial hospital stay.(ABSTRACT TRUNCATED AT 250 WORDS)