Objectives: Racial differences in health status and use of health services persist in the United States and are not completely explained by differences in socioeconomic status. This study examines differences in use of health services between White and African American children enrolled in Medicaid, controlling for other factors that affect service use. We make comparisons for use of primary preventive services, diagnosis and treatment of selected common childhood illnesses, and Medicaid expenditures. Methods: We linked Medicaid enrollment records, Medicaid paid claims data, and data on use of child WIC services to birth certificates for NorthCarolina children born in 1992 to measure use of health services and Medicaid expenditures by race for children ages 1, 2, 3, and 4. Logistic and Tobit regression models were used to estimate the independent effect ofrace, controlling for other variables such as low birth weight, WICparticipation, and mother's age, education, and marital status. Since allchildren enrolled in Medicaid are in families of relatively low income, racial differences in socioeconomic status are partially controlled.Results: African American children had consistently lower Medicaidexpenditures and lower use of health servicesthan did White children,after statistically controlling for other maternal and infantcharacteristics that affect health service use, including child WICparticipation. For example, total annual Medicaid expenditures were $207–303 less for African American children than for White children,controlling for other variables. African America children were significantly less likely to receive well-child and dental services than were White children. Conclusions: African American children enrolled in Medicaid use healthservices much less than White children, even when controlling forsocioeconomic status and other factors that affect service use. Linkingstate administrative databases can be a cost-effective way of addressingimportant issues such as racial disparities in health service use.