This paper describes how the PORTS are using data from the Medicare administrative records systems to study the medical care costs of specific conditions. The general strengths and weaknesses of the Medicare databases for studying cost related issues are discussed, and the relevant data elements are examined in detail. Changes in the nature of the data collected over time are noted. Information is provided on how the PORTS are using these data to estimate the cost to Medicare of treating Medicare beneficiaries with specific conditions and the social (opportunity) cost of treating these patients. Furthermore, information is provided on how data from the Medicare administrative records system can be used to determine the cost of services for patients who have been identified through other large databases (i.e., state hospital discharge tapes) or who have been enrolled in prospective cohort studies.