Younger persons with disabilities accounted for nearly one-third of the extraordinary growth in Medicaid spending over the 1988-1995 period. This population is critical to state efforts to control Medicaid expenditures and to reform health care. The brief discusses service delivery issues: the balance between institutional and home and community-based care; and the integration of acute and long-term care services within a managed care system. It also reviews four financing issues: the variation among states in Medicaid spending for this population; the link between Medicaid eligibility and the definition of disability used to qualify for SSI; the use of Medicaid home and community-based waivers; and the incentives for states to place service programs for younger people with disabilities under the Medicaid umbrella.