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OBJECTIVE: To provide a descriptive analysis of asthma prevalence and costs in a Medicaid population and gauge the degree of adherence with expert guidelines for asthma medication management from the National Asthma Education and Prevention Program. DATA SOURCES: Kentucky Medicaid administrative data for 1996. STUDY DESIGN: A cross-sectional retrospective analysis was used to determine adherence with asthma medication guidelines and utilization of asthma-related health care services and costs. Multivariate logistic regression was used to determine the relationship between nonadherence with the guidelines and utilization of health care services. PRINCIPAL FINDINGS: Of the 530,000 Medicaid recipients, 24,365 (4.6 percent) were identified as having asthma. Average annual asthma-related costs ($616) accounted for less than 20 percent of total health care costs ($3,645). Nonadherence to the guidelines was prevalent. Less than 40 percent of the patients received a prescription for a rescue medication, and fewer than 10 percent of the patients who received daily inhaled short-acting beta-2 agonists were regular users of inhaled steroids. Nonadherence to the guidelines was associated with an increased risk of an asthma-related hospitalization (odds ratio = 1.5, p < .05). CONCLUSIONS: Guideline nonadherence was widespread and associated with an increase in exacerbations of asthma that resulted in hospitalizations. Asthma prevalence and utilization of health care services in a Medicaid population were similar to previous estimates reported nationally and in health maintenance organizations.