We evaluated home care costs and the cost-effectiveness of home care vs alternative institutional care for respiratory technology-dependent children in a Medicaid Model Waiver Program. "Cost-savings" was measured as the difference between the established Medicaid reimbursable charges to enact an individualized care plan at a long-term care institution and the actual Medicaid reimbursements for home care. Ten patients--six dependent on mechanical ventilation and four with a tracheostomy who were receiving oxygen--were included in the analysis. The mean (+/- SD) annual home care costs were $109,836 +/- $20,781 for ventilator-dependent children and $63,650 +/- $12,350 for oxygen-dependent patients with a tracheostomy, representing annual savings of approximately $79,000 per patient and $83,000 per patient, respectively. The largest portion of home care reimbursements was for nursing care, accounting for 69.0% and 59.0% of the two patient groups. The full program (50 patients) has the potential for a savings of $4 million per year.