OBJECTIVE: To determine the net direct medical cost and utilization patterns of asthma in a public Medicaid program. METHODS: A retrospective matched case-control design was used. Administrative claims data were obtained for persons eligible for Medicaid benefits in North Carolina from May 1996 through April 1998. Asthma cases were defined as persons who had at least one inpatient claim for asthma (ICD-9-CM=493.) or had two or more outpatient asthma claims in the first year. A group of control subjects matched 1 to 1 on age, gender, and race was obtained. Persons who had a diagnosis for emphysema, COPD, or cancer or who were not between 1 and 65 years of age were excluded. Net costs were determined using the second year (May 1997 - April 1998) following the recruitment period. Adjusted differences were obtained from a generalized least square model using Huber White heteroscedasticity consistent variance—covariance matrix with terms to control for comorbidity burden, Medicare eligibility, and duration of eligibility. RESULTS: Thirteen thousand two hundred fifty five asthma cases were identified with a mean age of 16 years, 50% of who were black, and 56% were female. Asthma cases had a higher comorbidity burden than controls particularly for diabetes, psychoses, hypertension, and anemia. The average total annual cost was $3,226 for asthma cases compared to $2,015 (p < .05) for controls. This translated to a net un-adjusted annual cost of $1,210 or $111 per member per month (PMPM). After multi-variate adjustment, the net annual cost of asthma was estimated at $821 and $77 PMPM. Twice as many cases had emergency room visits and inpatient hospitalizations than did controls and prescription expenditures were over 100% higher than controls. CONCLUSION: Caring for indigent persons with asthma costs approximately 50% more than for similar persons without asthma. Inpatient and prescription expenditures account for approximately 50% of the additional expense.