BACKGROUND: Congenital anomalies are the leading cause of infant death and pediatric hospitalization, but existing estimates of the associated costs of health care are either cross-sectional surveys or economic projections. We sought to determine the percent of total hospital health care expenditures attributable to major anomalies requiring surgery within the first year of life. METHODS: Utilizing comprehensive California statewide data from 2008 to 2012, cohorts of infants undergoing major surgery, with birth defects and with surgical anomalies, were constructed alongside a referent group of newborns with no anomalies or operations. Cost-to-charge and physician fee ratios were used to estimate hospital and professional costs, respectively. For each cohort, costs were broken down according to admission, birth episode, and first year of life, with additional stratifications by birth weight, gestational age, and organ system. RESULTS: In total, 68,126 of 2,205,070 infants (3.1%) underwent major surgery (n = 32,614) or had a diagnosis of a severe congenital anomaly (n = 57,793). These accounted for $7.7 billion of the $18.9 billion (40.7%) of the total health care costs/expenditures of the first-year-of-life hospitalizations, $7.0 billion (48.6%) of the costs for infants with comparatively long birth episodes, and $5.2 billion (54.7%) of the total neonatal intensive care unit admission costs. Infants with surgical anomalies (n = 21,264) totaled $4.1 billion (21.7%) at $80,872 per infant. Cardiovascular and gastrointestinal diseases accounted for most admission costs secondary to major surgery or congenital anomalies. CONCLUSION: In a population-based cohort of infant births compared with other critically ill neonates, surgical congenital anomalies are disproportionately costly within the United States health care system. The care of these infants, half of whom are covered by Medi-Cal or Medicaid, stands as a particular focus in an age of reform of health care payments.