The authors of this study examine temporal patterns of medical expenditures by Medicare beneficiaries. A random sample of 204,917 individuals who were alive and in the program from 1974 to 1977 was investigated. Individuals hospitalized in 1974 were found to have twice the rate of hospitalization in 1975, 1976, or 1977 compared with individuals who were not hospitalized in 1974. The increased rate of hospitalization remained constant throughout the 3 years. Individuals with large medical expenditures in 1974 were 20 times more likely to have large medical expenditures the following year, and this rate declined slowly in the following 2 years. The results suggest that the value of a Medicare voucher or the level of Medicare's payment to health maintenance organizations should include an adjustment factor for prior health care utilization. The results also suggest that multiyear limits on total Medicare coinsurance and deductible payments would be more equitable than single-year limits.