Despite a number of studies investigating the effect of pharmacotherapy on treatment costs for schizophrenia patients, there has been little attention given to the effect of family intervention. In this study, data from the Kansas Medicaid system were used to analyze healthcare costs for 164 schizophrenia patients who had participated in family intervention. Structural equation modeling was used to test two competing views of the role of family intervention in treatment. The results showed that a model including direct and indirect effects of family intervention provided a better fit to the data. Family intervention had a significant indirect effect on general medical costs (through other psychological treatment) that showed a savings of $586 for each unit increase in the provision of these services. In addition, the total indirect effects for family intervention showed a $580 savings for general medical costs and $796 for hospitalization costs (for each unit increase).