OBJECTIVE: For women over age 45 that experience osteoporosis-related fractures (OPFx), Medicaid covers about 25% while Medicare covers nearly one-half of the related-health care cost. This study estimated the direct cost of OPFx to state Medicaid budgets. METHODS: This retrospective analysis utilized Medicaid claims databases from three states. The databases contained the claims experience of approximately eight million Medicaid recipients. The study sample consisted of Medicaid beneficiaries with at least one claim containing an osteoporosis diagnosis (733.0x) between January 1, 1999 and December 31, 2001. Beneficiaries with a fracture and a diagnosis of osteoporosis were assigned to the case cohort; a propensity score-based matching method was used to select a cohort of controls among a pool of beneficiaries with osteoporosis, but without a fracture. An exponential conditional mean model was used to estimate the incremental annual cost associated with fracture. RESULTS: The OPFx cohort (n=7626) and a 1:1 matched control group with osteoporosis, but without a fracture were identified. The OPFx cohort was 85.8% female, had an average age of 65, were 53.2% White and 11.1% Asian, and 48.9% were dual-eligible for Medicare. There were significant increases (all p<0.05) from the pre-period to study-period for this cohort in the proportion that had at least one hospital admission (12.0% vs. 22.3%), nursing home admission (8.7% vs. 18.2%) or ER visit (28.2% vs. 45.9%); in contrast, the control cohort had very little variation in utilization. The regression-adjusted incremental cost in the year following fracture was estimated at $4007 per osteoporosis patient. The estimated incremental cost was $5370 for the subset of patients who were dual-eligible. CONCLUSIONS: Osteoporosis-related fractures exhibit a tremendous humanistic and economic toll in patients. The economic burden of OPFx on state Medicaid budgets is substantial. Preventative strategies for avoiding fractures could help ameliorate some of this burden.