Objectives: Persons with schizophrenia are heavy and persistent users of Medicaid services. Interruptions in their Medicaid coverage may have serious consequences for the mental health of these individuals and their subsequent use of mental health services. This study sought to determine the impact of interruptions in Medicaid coverage on the use of Medicaid-reimbursed inpatient psychiatric services over a four-year period. Methods: Inpatient Medicaid claims and eligibility files for 1,830 Medicaid beneficiaries with schizophrenia in Utah from December 1990 to December 1994 were used to identify differences in hospital admissions and total number of days in a hospital associated with interrupted Medicaid coverage. Of the 1,830 Medicaid beneficiaries identified, 1,463 experienced continuous Medicaid eligibility, and 367 had interruptions in their eligibility. Results: Interruptions in Medicaid coverage were associated with an average of .63 more psychiatric hospitalizations per beneficiary over the four-year period, representing an 86 percent higher hospital admission rate. This increase appeared to be largely due to a subset of persons who have much higher hospitalization rates after an interruption in Medicaid coverage. Interruptions in Medicaid coverage were associated with a mean of 8.3 more days of psychiatric hospitalization over the four-year period, representing 61 percent more hospital days. Conclusions: Medicaid beneficiaries who experience interruptions in coverage have, on average, a significantly greater use of inpatient psychiatric services while participating in Medicaid than beneficiaries with continuous Medicaid coverage. These findings suggest potential benefits of maintaining continuous Medicaid eligibility for beneficiaries with a severe mental illness.