Although state Medicaid programs may bear a large portion of the costs of Alzheimer's disease (AD), current information on spending is not available. Using a health insurance claims database for a 10% random sample of California Medicaid (“Medi-Cal”) recipients 60+ years of age, the authors estimated the excess cost of AD to Medi-Cal in 1995 as the difference in expenditures between an AD cohort (those with AD or related dementias) and an age- and sex-matched cohort without AD. Among 62,450 recipients, 2,575 (4.1%) were found to have AD or related dementias, and their average payments were approximately $7,700 higher (P<0.01) than those for the comparison group. These estimates suggest that Medi-Cal spends about $200 million on AD and related dementias annually, a burden that represents nearly 10% of state spending on elderly patients.