Awareness of acetaminophen-related liver toxicity has been growing. However, its frequency and cost has not been well documented on a population basis. OBJECTIVE: To estimate the incidence and costs of hepatotoxicity related to acetaminophen use for the California Medicaid program (“Medi-Cal”). METHODS: This study was based on administrative claims data for a 10% random sample of Medi-Cal recipients in 1996. Individuals with one or more inpatient or outpatient claims in 1996 with ICD-9-CM diagnoses of acetaminophen-related liver-toxicity were selected for inclusion in this analysis. An episode of treatment was defined as the period of time between the dates of hospital admission and discharge for which at least one qualifying diagnosis was listed, or as a day of outpatient treatment on which a patient had a qualifying diagnosis. All services occurring during an episode were assumed to be related to acetaminophen liver toxicity. RESULTS: A total of 244 recipients in our 10% sample had one or more treatment episodes of acetaminophen-related liver toxicity during 1996 (approximately 41 persons per 100,000 eligibles), and over half of these occurred in persons under 21 years of age. Approximately twenty percent of patients required admission to a hospital for treatment. The average cost per patient with liver toxicity was estimated to be approximately $1,070. CONCLUSIONS: Based on our estimates of incidence and per-person expenditures, annual spending by the Medi-Cal program for acetaminophen-related hepatotoxicity is projected to be approximately $2.6 million in 1996. The actual incidence of this problem is likely to be greater than that reported here, since this study only includes poisonings that led to a medical encounter rather than all possible occurrences.