OBJECTIVES: To estimate the national prevalence and the direct incremental costs of Chronic Obstructive Pulmonary Disease (COPD) and asthma  using the 2007 Medical Expenditure Panel Survey (MEPS) data. METHODS: This was a retrospective study of patient records identified using ICD-9-CM diagnosis and procedure codes for principal diagnosis of COPD (491.0, 492.0, 496.0) and asthma (493.0, 493.1, 493.2) from the 2007 MEPS data. The main independent variable was the presence or absence of either COPD or asthma. Age, gender, race, income, insurance status, marital status and region were selected as covariates. The dependent variables were total health care, office-based, outpatient, inpatient, emergency room, and prescription expenditures. Descriptive statistics and regression analyses were utilized to generate prevalence data, total mean health care expenditures, and significant predictors for individuals with COPD and asthma. RESULTS: The national prevalence of COPD and asthma in 2007 was estimated at 1.3 million and 28.3 million, respectively. Among individuals with COPD, the estimated total direct incremental health care expenditures per person was $1739.27 with a national estimate of $2.2 billion. Among individuals with asthma, the estimated total direct incremental health care expenditure per person was $2133.83 with a national estimate of $60 billion. The largest cost category for COPD was office-based expenditures ($610.55) followed by prescription expenditures ($347.88). For asthma, the largest cost categories were prescription expenditures ($760.72) followed by inpatient expenditures ($617.23). Age, gender, region, insurance and marital status were significant predictors for health care expenditures in COPD and asthma. CONCLUSIONS: This study highlights the socio-demographic disparities in terms of prevalence and provides national estimates on health care expenditures among individuals with COPD and asthma. These estimates can serve as a guide for policy makers in the formulation of health care policies on screening, treatment guidelines, and identification of high-risk population for COPD and asthma.