In July 1989, the income limit on Medicaid eligibility for pregnant women in Florida was increased from 100% to 150% of the poverty level. This study estimated changes in the flows of funds and services by major payer groups during the period preceding expansion (July 1988-June 1989) and for calendar year 1991. The number of births financed annually by Medicaid in Florida increased by 47% following the eligibility expansion, from 47,400 in 1988-1989 to 69,600 in 1991. This increase stemmed largely from covered births to women who otherwise would have been uninsured. The additional prenatal care financed by Medicaid was delivered almost entirely by county public health departments, which increased their capacity by more than 100%. Medicaid payments for maternity care increased 39%, from $135 million to $187 million, while payments made by the uninsured dropped by 29%. These changes resulted in a 5% rise in hospital revenues, despite little change in the number of admissions. The Medicaid expansion benefited low-income pregnant women and hospitals in Florida. It is unknown whether the private delivery system would have accommodated the increased demand in the absence of the public health system response.