Purpose: While state policy and market factors are known to have contributed to the increased supply of residential care, little is known about efforts to accommodate demand from lower-income consumers. This study describes participation and expenditure trends for residential care services funded by Medicaid waivers and examines variation across programs. Design and Methods: We collected annually reported Center for Medicare and Medicaid Services (CMS) Form 372 data from state officials for each waiver that provides residential care services for the period 1995 to 2002. Descriptive statistics examined waiver program participation and expenditures while adjusting for population changes and inflation. Results: Between 1995 and 2002, national Medicaid waiver-funded residential care participants increased by almost threefold to 120,000 and expenditures more than quadrupled to $2.3 billion. However, Medicaid waiver program participation and spending varied considerably by state, by target population, and by level of care. Implications: This study highlights three important policy concerns: (a) Medicaid-supported residents remain underrepresented in residential care, (b) large interstate variation persists in Medicaid residential care service provision, and (c) state policy choices favor Medicaid spending on residential care for persons with mental retardation or developmental disabilities. (Contains 2 tables and 2 figures.)