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Abstract Objectives: While skin cancer is still the most common cancer in Australia, important information gaps remain. This paper addresses two gaps: i) the cost impact on public hospitals; and ii) an up‐to‐date assessment of economic credentials for prevention. Methods: A prevalence‐based cost approach was undertaken in public hospitals in Victoria. Costs were estimated for inpatient admissions, using State service statistics, and outpatient services based on attendance at three hospitals in 2012–13. Cost‐effectiveness for prevention was estimated from ‘observed vs expected’ analysis, together with program expenditure data. Results: Combining inpatient and outpatient costs, total annual costs for Victoria were $48 million to $56 million. The SunSmart program is estimated to have prevented more than 43,000 skin cancers between 1988 and 2010, a net cost saving of $92 million. Skin cancer treatment in public hospitals ($9.20∼$10.39 per head/year) was 30‐times current public funding in skin cancer prevention ($0.37 per head/year). Conclusions: At about $50 million per year for hospitals in Victoria alone, the cost burden of a largely preventable disease is substantial. Skin cancer prevention remains highly cost‐effective, yet underfunded. Implications for public health: Increased funding for skin cancer prevention must be kept high on the public health agenda. Hospitals would also benefit from being able to redirect resources to non‐preventable conditions.