The aim of this study was to estimate the healthcare costs of asthma and chronic obstructive pulmonary disease (COPD), in the Netherlands, in 1993. Also studied was the future development of these costs, as a result of ageing and possible changes in smoking behavior. A prevalence-based cost-of-illness approach was used to estimate direct medical costs. Age- and gender-specific data were obtained from representative national registries and large, representative surveys. To model future costs, cost estimates were linked to an epidemiological model based on a dynamic multi-state lifetable. It describes 1 yr changes, from one state to another, that result from ageing, birth, migration, incidence, recovery from asthma and death due to asthma, COPD or other causes, and starting or quitting smoking. Three different scenarios were modelled: 1) a reference scenario which primarily predicts the impact of ageing. 2) an 'attainable' smoking reduction scenario and 3) an 'extreme' smoking reduction scenario. Direct medical costs were estimated to be $US 346 million in 1993. With increasing age, the relative importance of asthma in total asthma and COPD costs decreased from 91% to less than 4%. Annual costs per patient were estimated to be $US 499 for asthma and $US 876 for COPD. The breakdown of costs differed considerably between asthma and COPD. The reference scenario predicted the costs to increase by 60% to reach $US 555 million by 2010, COPD prevention as modelled in the second and the third scenario reduced the projected cost increase from 60%, to 57% and 48%, respectively. Together, the direct costs of asthma and COPD represent 1.3% of the Dutch health care budget. The breakdown of the costs shows different patterns for asthma and COPD. The costs of these diseases are expected to increase by 60% in the near future. In the short run the impact of smoking reduction on reducing this increase is relatively small, but it will be greater in the long run.