Background: Medicare beneficiaries incur 27%-30% of lifetime charges in the last year of life; most charges occur in the last quarter. Factors associated with high end-of-life Medicare charges include less advanced age, non-white race, absence of advance directive, and urban residence. Methods: We analyzed Medicare hospital charges in the last year of life for nursing home residents with severe cognitive impairment, focusing on rural-urban differences. The study population consisted of 3,703 nursing home residents (1,882 rural, 1,821 urban) in Minnesota and Texas who died in 2000-2001. Data on Medicare hospital charges were obtained from 1998-2001 Centers for Medicare and Medicaid Services MedPAR files. Results: During the last year of life, unadjusted charges averaged $12,448 for rural subjects; $31,780 for urban. The charges were distributed across the last 4 quarters similarly for the 2 populations, with 15%-20% of charges incurred in each of the first 3 quarters, and 47% (rural) and 52% (urban) in the last quarter. At the individual level, a higher percentage of hospital charges were incurred in the last 90 days by urban than by rural residents (P [less than] 0.001). A larger proportion of urban (43%) than rural (37%) residents were hospitalized in the final quarter. The charges for hospitalized residents (N = 1,994) were distributed similarly to those of the entire study population. Discussion: Medicare hospital charges during the last year of life were lower for rural nursing home residents with cognitive impairment than for their urban counterparts. Charges tend to be more concentrated in the last 90 days of life for urban residents.