The aim of this study was to compare medical cost of hospice care and that of conventional care during the last year of life, and identify factors that influenced the cost. From January to August 2003 592 terminal cancer patients receiving care from 5 hospice care units and 2 hospice care teams in general hospitals were enrolled to case group. Two hundreds and seventy two terminal cancer patients receiving conventional care from 7 general hospitals were enrolled to hospital-based control group, and 1,636 terminal cancer patients from 122 general hospitals located in same regions with the 7 hospitals were enrolled to community-based control. We used characteristics and medical cost from data of National Health Insurance Cooperation. Total medical cost per beneficiary in cases was about 10 millions won, 14.5 millions in hospital-based controls and 11.1 millions in community-based controls. The hospice care saved $45\%$ over the last year of life compared with hospital-based controls (p<0.0001). Saving of inpatient cost account for approximately $80\%$ of saving per beneficiary. Hospice care saved $29\%$ of medical cost per hospitalization day compared with hospital­based controls and $17\%$ compared with community-based controls (p<0.0001). Multiple regression analyses showed that hospice care significantly saved the medical cost. This study suggest that hospice care save medical cost compared with hospital-based control and community-based control. Most of saving of inpatient cost account for approximately $80\%$ of saving of medical cost.