We examined the impact of antiretroviral treatment adherence among Hepatitis C co-infected HIV patients on survival and clinical outcomes. We analyzed Medicaid claims data from fourteen southern states from 2005-2007, comparing survival and clinical outcomes and cost of treatment for HIV and hepatitis-C co-infected patients (N=4,115) at different levels of adherence to antiretroviral therapy.More than one in five patients (20.5%) showed less than 50% adherence to antiretroviral treatment, but there were no racial-ethnic or gender disparities. Significant survival benefit was demonstrated at each incremental level of adherence to antiretroviral therapy (one-year mortality ranging from 3.5% in the highest adherence group to 26.0% in the lowest). Low adherence patients also had higher rates of hospitalization and emergency department visits. Relative to patients with high (>95%) ART-adherence, those with less than 25% treatment adherence had four-fold greater risk of death (adjusted odds ratio 4.22 [95% CI, 3.03,5.87]). Non-drug Medicaid expenditures were lower for high adherence patients, but cost of medications drove total Medicaid expenditures higher for high-adherence patients. Cost per quality-adjusted life year (QALY) saved (relative to the <25% low-adherence group) ranged from $21,874 for increasing adherence to 25-50% to $37,229 for increasing adherence to 75-95%. Adherence to antiretroviral therapy for patients with HIV and hepatitis C co-infection is associated with lower adverse clinical outcomes at a Medicaid cost per QALY commensurate with other well-accepted treatment and prevention strategies. Further research is needed to identify interventions which can best achieve optimal ART adherence at a population scale.