Background: Gaps in Medicaid coverage can result in inadequate access to care. This can be particularly detrimental to those with a chronic disease such as diabetes. Objective: To assess whether a lapse in Medicaid coverage is associated with an increase in expenditures, and acute care utilization upon reenrollment among beneficiaries with diabetes. Research Design: Using multivariate regression analyses, we compared pre- versus post-expenditures and utilization among 2102 individuals with diabetes who had experienced at least one 1-month lapse in their Medicaid coverage. Measures: Dependent variables were the number of inpatient episodes, total length of stay, total number of emergency room visits, total expenditure, and pharmaceutical expenditures. These were aggregated over 3-month spans that either immediately preceded or immediately followed a lapse in coverage. Key predictor variables included a variable that identified the span as occurring pre-lapse or post-lapse in coverage, and a continuous variable identifying the length of the lapse. Predicted expenditure and utilization were calculated. Results: Overall total program expenditures were higher for post-lapse periods compared with pre-lapse periods. Total expenditures were estimated to increase by $239 per member per month for the 3-month period. The likelihood of having any expenditure was actually lower in the post-lapse period. However inpatient and emergency room use was higher. Conclusions: The results from this study suggest that interruptions in Medicaid coverage are associated with overall greater program expenditures in the post-lapse periods. However, this increase in expenditures seems to be driven by a subset of individuals whose greater use of inpatient and emergency room services increased overall program costs. Copyright © 2008 by Lippincott Williams & Wilkins.