Colorectal cancer is the second leading cause of cancer-related mortality among Canadians. We derived the direct health care costs associated with the lifetime management of an estimated 16,856 patients with a diagnosis of colon and rectal cancer in Canada in 2000. Information on diagnostic approaches, treatment algorithms, follow-up and care at disease progression was obtained from various databases and was integrated into Statistics Canada's Population Health Model (POHEM) to estimate lifetime costs. The average lifetime cost (in Canadian dollars) of managing patients with colorectal cancer ranged from $20,319 per case for TNM stage I colon cancer to $39,182 per case for stage III rectal cancer. The total lifetime treatment cost for the cohort of patients in 2000 was estimated to be over $333 million for colon and $187 million for rectal cancer. Hospitalization represented 65% and 61% of the lifetime costs of colon and rectal cancer respectively. Disease costing models can be important policy- relevant tools to assist in resource allocation. Our results highlight the importance of performing preoperative tests and staging in an ambulatory care setting, where possible, to achieve optimal cost efficiencies. Similarly, terminal care might be delivered more efficiently in the home environment or in palliative care units.