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Objectives: The purpose of the study was to examine the cost of illness and quality of life (QOL) of patients and caregivers with mild cognitive impairment (MCI) or Alzheimer’s disease (AD) based on their severity and to identify factors affecting the QOL of the patients and their caregivers. Methods: The subjects of this study were 140 patients with MCI or AD and 121 caregivers for those patients. The cost of illness was investigated as direct costs (medical and nonmedical costs) and indirect costs (productivity loss). The medical costs was calculated using medical expense data received from hospitals, and nonmedical costs and productivity loss were calculated using data collected in a mail survey. Patients’ QOL was measured with the Korean versions of EuroQol-5D (KEQ-5D) and KQOL-AD, while caregivers’ QOL was measured with KEQ-5D and the Korean version of Carer Quality of Life. Results: Average annual direct costs were measured as follows: MCI or very mild AD−2470000 won; mild AD−13663000 won; moderate AD−14292000 won; and severe AD−16591000 won. Indirect costs were measured in terms of average lifetime productivity loss as follows: MCI or very mild AD−6117000 won; mild AD−6336000 won; moderate AD−20871000 won; and severe AD−19773000 won. Patients’ QOL showed a statistically significant decline as condition severity increased, whereas caregivers’ QOL showed a significant decline between MCI or very mild AD and mild AD groups. Different factors affected the QOL of patients and their caregivers: informal medical costs and long-term care costs affected patients’ QOL, and informal care costs affected caregivers’ QOL. Conclusion: The greatest increase in average annual costs was observed between MCI or very mild AD and mild AD, and caregivers’ QOL deterioration was observed between MCI or very mild AD and mid AD. To curb rising costs and avoid deterioration of patients’ and caregivers’ QOL, medical and social interventions are required to prevent the progression from MCI or very mild AD to mild AD.

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