OBJECTIVES: Evaluate whether one-year total health care expenditure and utilization differ between the appropriate therapy and inappropriate therapy for severe asthmatic patients in a Medi-Cal population. METHODS: This is a cross-sectional retrospective study of asthmatic patients provided care between July 2002 and July 2006 in the California Medi-Cal program. The study evaluates severe asthmatic patients who had at least one hospitalization due to asthma. Patients were followed for asthma-related health care service use and costs for one year after asthma related hospitalization. Patients under treatment with asthma-related medications for other conditions and/or aged 65 or older were excluded from the sample. Patients were classified in two groups: appropriate and inappropriate therapy based on published guidelines. Appropriate therapy was defined as controller use without daily reliever use and inappropriate therapy was defined as controller use with daily reliever use or no controller use with reliever use. RESULTS: A total of 4728 patients were included in the analyses. Multivariate analysis showed that appropriate therapy was associated with a 9% reduction in asthma related health care costs compared with the inappropriate therapy group (p-value 0.0287). Gender (Male) and race (white and asian compared to Hispanic) were also associated with decreased total health care expenditures. Moreover, patients who received appropriate therapy are less likely (34% less) to have an asthma-related acute exacerbation (OR =0.664, p-value <0.0001) compared to those with inappropriate therapy. CONCLUSIONS: The findings suggest that the use of appropriate therapy improves the asthma-related health outcomes for severe asthmatic patients. Patients in the appropriate therapy group are less costly and less likely to be hospitalized or have an emergency visit compared to patients who had inappropriate therapy. Despite years of national efforts and effective medications, there is substantial room for improvement and there continues to be excess healthcare utilization and expenditures for some severe asthma patients.