OBJECTIVE: To evaluate the rate at which children with and without chronic conditions became recipients of Medicaid and the Children's Health Insurance Program (CHIP) during a period of economic recession and to evaluate changes in spending and service utilization among children with chronic conditions. METHODS: Child recipients of Illinois fee-for-service Medicaid and CHIP from 2007 to 2010 were assigned to 5 chronic condition groups using 3M Clinical Risk Group software. Outcome measures were change in recipient number in each chronic condition category, total and per capita spending changes within various categories of service, and changes in service utilization. RESULTS: From 2007 to 2010, children with chronic conditions became recipients of Illinois fee-for-service Medicaid and CHIP at a higher rate than children without chronic conditions (26.7% vs 14.5%). Inflation-adjusted mean spending fell with a linear trend in all chronic condition categories except malignancy (P < .001). Per member inpatient and emergency department service utilization fell and outpatient service utilization increased in all condition categories. Average inpatient length of stay declined in all chronic condition groups (P < .001) but not in children without chronic conditions. CONCLUSIONS: From 2007 to 2010, a period of severe economic recession, a disproportionately high number of children with chronic conditions became Illinois Medicaid and CHIP recipients. Total spending increases were driven by an increase in the number of recipients with the most complex chronic conditions, not increases in per-member spending.