OBJECTIVES: We studied the cost implications of putting moderate or severe adult asthma patients on combined long-term-control drug therapy (inhaled corticosteroids + long-term-control bronchodilators) versus on inhaled corticosteroids alone. METHODS: The study sample was retrospectively selected from Medi-Cal eligibles between January 1995 and December 2000. The final data set included 1547 patients. The targeted asthma patient population was moderate and severe adult asthma patients who recently had an asthma-related urgent event (asthma related hospitalization or emergency care). One-year total healthcare cost was compared between the combined therapy and the monotherapy. Both the average treatment effect (ATE) and the treatment effect on the treated (TT) were estimated. A linear outcome-equation model and a propensity score method were applied to adjust for observed selectivity, and a parametric switching regression model for both observed and unobserved selection bias. Sociodemographic variables, comorbidities, previous healthcare cost, key-event type, and drug utilization were adjusted. All costs were adjusted to 1999 U.S. dollars using the medical care CPI. RESULTS: When adjusting only the observed selectivity using either the linear outcome-equation model or the propensity score method, we found no statistical significant difference in one-year total health care costs between the combined therapy and the monotherapy. However, when the unobserved selectivity was also adjusted using the switching regression model, the combined therapy was less expensive (at 90% CI) in both the treated population (TT) and the general population (ATE). The TT was even less than ATE and the marginal savings would be $3150 annually. CONCLUSIONS: Given the combined therapy's clinical benefit shown in previous studies, it is the dominant long-term asthma-control therapy in the studied population. The difference in ATE and TT indicates that the combined therapy was given to patients whose health status could be improved the most by it.