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To analyse the racial and ethnic variation in health resource use (HRU) and direct medical care (DMC) cost in elderly men with prostate cancer.This was a retrospective case-control study using the linked Surveillance, Epidemiology, and End Results Medicare database. Patients with prostate cancer diagnosed between 1995 and 1998 (50 147 men) were identified and followed retrospectively for 1 year before and 5 years after the diagnosis. Phase-specific HRU and DMC costs were compared between racial and ethnic groups using parametric and nonparametric analysis. To compute the incremental cost of prostate cancer, a matched non-cancer control group was extracted from Medicare database. Poisson and general linear models (log-link) were used to identify the association of race and ethnicity with HRU and DMC cost, after controlling for potentially influential clinical and demographic covariates.The African-American group was more likely to have emergency-room visits (odds ratio 1.19, 95% confidence interval 1.12–1.28) and less likely to have outpatient visits (0.96, 0.96–0.97) than whites. However, the Hispanic group was more likely to have inpatient and outpatient visits (odds ratio 0.88, 0.83–0.91; and 0.93, 0.91–0.95) than whites. Adjusted DMC cost showed racial and ethnic variation in all phases except the treatment and terminal phases. Factors associated with DMC cost varied among racial and ethnic groups.The incremental burden of prostate cancer remains significant in the long term. Overall, the cost of prostate cancer care was higher among African-American men than white and Hispanic men. This indicates the need for further research on care-level factors to comprehend the racial and ethnic disparity in HRU and cost.