The infrequent use of ABO-incompatible (ABOi) kidney transplantation in the United States may reflect concern about the costs of necessary preconditioning and posttransplant care. Medicare data for 26 500 live donor kidney transplant recipients (2000 to March 2011), including 271 ABOi and 62 A2-incompatible (A2i) recipients, were analyzed to assess the impact of pretransplant, transplant episode and 3-year posttransplant costs. The marginal costs of ABOi and A2i versus ABO-compatible (ABOc) transplants were quantified by multivariate linear regression including adjustment for recipient, donor and transplant factors. Compared with ABOc transplantation, patient survival (93.2% vs. 88.15%, p = 0.0009) and death-censored graft survival (85.4% vs. 76.1%, p < 0.05) at 3 years were lower after ABOi transplant. The average overall cost of the transplant episode was significantly higher for ABOi ($65 080) compared with A2i ($36 752) and ABOc ($32 039) transplantation (p < 0.001), excluding organ acquisition. ABOi transplant was associated with high adjusted posttransplant spending (marginal costs compared to ABOc - year 1: $25 044; year 2: $10 496; year 3: $7307; p < 0.01). ABOi transplantation provides a clinically effective method to expand access to transplantation. Although more expensive, the modest increases in total spending are easily justified by avoiding long-term dialysis and its associated morbidity and cost.