Background. The use of expanded criteria donors (ECDs) in cadaveric renal transplantation is increasing in the US. We assess the economic impact of the use of ECDs to the Medicare end stage renal disease program. Methods. The United Nations for Organ Sharing renal transplant registry was merged to Medicare claims data for 42,868 cadaveric renal transplants performed between 1991-1996 using USRDS identifiers. Only recipients for whom Medicare was the primary payer were considered, leaving 34,534 transplants. An ECD was defined as (1) age ≤5 or ≥55 years, (2) nonheart-beating donors, donor history of (3) hypertension or (4) diabetes. High-risk recipients (HRR) were age >60 years, or a retransplant. Medicare payments from the pretransplant dialysis period were projected forward to provide a financial 'breakeven point' with transplantation. Results. There were 25,600 non-HRR transplants, with 5,718 (22%) using ECDs, and 8,934 HRR transplants, of which 2,200 (25%) used ECDs. The 5-year present value of payments for non-ECD/non-HRR donor/recipient pairings was $121,698 vs. $143,329 for ECD/non-HRR pairings (P<0.0001) and, similarly was $134,185 for non-ECD/HRR pairings vs. $165,716 for ECD/HRR pairings (P<0.0001). The break even point with hemodialysis ranged from 4.4 years for non-ECD/non-HRR pairings to 13 years for the ECD/HRR combinations but was sensitive to small changes in graft survival. Transplantation was always less expensive than hemodialysis in the long run. Conclusions. The impact of ECDs on Medicare payments is most pronounced in high-risk recipients. Cadaveric renal transplantation is a cost-saving treatment strategy for the Medicare ESRD program regardless of recipient risk status or the use of ECDs.