Medicaid claims data for a 35% random sample (n = 146,167) of persons receiving benefits from Aid to Families with Dependent Children, and who were eligible for Medicaid in Texas in 1980 are used to examine the impact of outpatient department (OPD)/emergency room (ER) care. Average cost is estimated for OPD/ER and private physician (MD) visits. Persons are also classified by primary source of care. Data on age, race, sex, residence, and months eligible in 1980 permitted prediction of statistically adjusted differences between OPD- and MD-oriented persons for number of ambulatory visits, probability of hospitalization, 1980 total costs, and both hospital episode institutional amount paid and length of stay. OPD/ER visits were found to be $23 more expensive than MD visits. OPD-oriented persons had fewer ambulatory visits, slightly more hospitalizations, greater total and episode costs, and longer lengths of stay than did MD-oriented persons. Potential cost savings are projected.