Approximately 13 percent of all pregnant women smoke during pregnancy despite known adverse health effects. Medicaid Programs pay for an estimated 27-53 percent of all births, yet little is known about smoking prevalence nor resulting expenses in this population. Findings indicate that pregnant women with deliveries paid by Medicaid are more than twice as likely to smoke as privately insured women; two-thirds of the estimated $366 million in 1996 neonatal expenses attributable to maternal smoking accrues to Medicaid Programs and these estimates vary widely across States. In light of these estimates, States should carefully consider targeted interventions and appropriate policies.