OBJECTIVE: To estimate the annual cost of chronic obstructive pulmonary disease (COPD) to the California Medicaid ("Medi-Cal") program. METHODS: This study employed a retrospective matched cohort design and administrative claims data for a 20% random sample of Medi-Cal recipients. Patients selected were 50+ years of age, with a diagnosis of COPD in 2000, and eligible for Medicaid as of January 1, 2000. The comparison cohort consisted of patients without COPD matched on age, gender, race, and dual (Medicare/Medicaid) eligibility status. The cost of COPD was estimated as the difference in mean Medi-Cal payments between the COPD and comparison cohorts during 2000. RESULTS: A total of 12,538 patients with COPD met study inclusion criteria. Approximately 8% were diagnosed with emphysema, 37% with chronic bronchitis, and 55% with unclassified chronic airway obstruction. COPD patients and their matched controls (n=12,538) averaged 70 years of age; 55% were female, 55% were white, and 65% were eligible for Medicare benefits. Charlson comorbidities, especially congestive heart failure and vascular disease, were more common in the COPD cohort. The proportion of patients hospitalized was higher in the COPD cohort both for respiratory-related conditions (19% vs. 2% for controls, p<0.05) and for any reason (38% vs. 15%, p<0.05). The annual per-patient cost of COPD was estimated to be $3185 ($9537 for the COPD cohort minus $6352 for the control cohort), 55% ($1765) of which was due to hospitalizations. Annual per-patient costs of COPD were $4679 for patients <65 years versus $2322 for those 65+ years. Disease costs also were higher among patients with emphysema ($7094) versus chronic bronchitis ($3131) or unclassified chronic airway obstruction ($2694). CONCLUSIONS: On an aggregate basis, COPD costs the Medi-Cal program $200 million annually. Acute hospitalizations drive costs, despite coverage available through Medicare for the use of these services by elderly patients.