Background: The Chinese government has provided health services to those infected by the human immunodeficiency virus (HIV) under the acquired immunodeficiency syndrome (AIDS) care policy since 2003. Detailed research on the actual expenditures and costs for providing care to patients with AIDS is needed for future financial planning of AIDS health care services and possible reform of HIV/AIDS-related policy. The purpose of the current study was to determine the actual expenditures and factors influencing costs for untreated AIDS patients in a rural area of China after initiating highly active antiretroviral therapy (HAART) under the national Free Care Program (China CARES).Methods: A retrospective cohort study was conducted in Yunnan and Shanxi Provinces, where HAART and all medical care are provided free to HIV-positive patients. Health expenditures and costs in the first treatment year were collected from medical records and prescriptions at local hospitals between January and June 2007. Multivariate linear regression was used to determine the factors associated with the actual expenditures in the first antiretroviral (ARV) treatment year.Results: Five ARV regimens are commonly used in China CARES: zidovudine (AZT) + lamivudine (3TC) + nevirapine (NVP), stavudine (D4T) + 3TC + efavirenz (EFV), D4T + 3TC + NVP, didanosine (DDI) + 3TC + NVP and combivir + EFV. The mean annual expenditure per person for ARV medications was US$2,242 (US$1 = 7 Chinese Yuan (CNY)) among 276 participants. The total costs for treating all adverse drug events (ADEs) and opportunistic infections (OIs) were US$29,703 and US$23,031, respectively. The expenses for treatment of peripheral neuritis and cytomegalovirus (CMV) infections were the highest among those patients with ADEs and OIs, respectively. On the basis of multivariate linear regression, CD4 cell counts (100-199 cells/μL versus <100 cells/μL, P = 0.02; and ≥200 cells/μL versus <100 cells/μL, P < 0.004), residence in Mangshi County (P < 0.0001), ADEs (P = 0.04) and OIs (P = 0.02) were significantly associated with total expenditures in the first ARV treatment year.Conclusions: This is the first study to determine the actual costs of HIV treatment in rural areas of China. Costs for ARV drugs represented the major portion of HIV medical expenditures. Initiating HAART in patients with higher CD4 cell count levels is likely to reduce treatment expenses for ADEs and OIs in patients with AIDS. © 2011 Zhou et al; licensee BioMed Central Ltd.