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OBJECTIVE: This report provides an update on insurance coverage, use of health care services, and health expenditures for children and youth in the United States. In addition, the report provides information on variation in hospitalizations for children from a new 22-state hospital discharge data source. METHODS: The data on insurance coverage, utilization, and expenditures come from the Medical Expenditure Panel Survey. The data on hospitalizations come from the Database for Pediatric Studies, which is part of the Healthcare Cost and Utilization Project. Both data sets have been prepared by the Agency for Healthcare Research and Quality. RESULTS: Few changes in insurance coverage occurred between 1996 and 1998. About two thirds of American children are covered by private insurance and 19% by public sources; the remaining 15% are uninsured. Of the 71.5% of children who have at least 1 doctor's office visit, the average number of visits was 3.9, but this ranged from 2.7 among the uninsured to 4.2 for those with private insurance. Slightly more than half of children had a prescription, and these averaged 5.4 prescriptions. The majority of children (85%) incur medical expenditures, averaging $1019 for children with any expenditure. Private health insurance was by far the largest payer of medical care expenses for children, even more so than among the general population. However, nearly 21% of expenditures for children's health care were paid out of pocket by children's families. The data also show substantial differences in average length of hospitalization across states, ranging from 2.7 to 4.0 days, and rates of hospital admission through the emergency department, which vary across states from 9% to 23%. Injuries are a major reason for hospitalization, accounting for 1 in 6 hospital stays among 10- to 14-year-olds. In the 10-17 age group, 1 in 7 hospital stays are due to mental disorders. Among 15- to 17-year-olds, more than one third of all hospital stays are related to childbirth and pregnancy. CONCLUSION: Children's use of health care services varies considerably by what type of health insurance coverage they have. Expenditures for children entail a substantial out-of-pocket component, which may be quite large for children with major health problems and which may represent a significant burden on lower-income families. Substantial variation in hospitalization exits across states.