OBJECTIVES: To examine the mortality and rehospitalization rates among hospitalized U.S. Medicare patients diagnosed with pneumonia. METHODS: Using U.S. Medicare data, 30-day and 1-year mortality rates as well as rehospitalization rates were calculated for patients with a primary diagnosis of pneumonia (International Classification of Diseases, 9th Revision, Clinical Modification [ICD-9-CM] codes 480.0-483.99 or 485-487) or a secondary discharge diagnosis of pneumonia with a primary diagnosis of respiratory failure (ICD-9-CM code 518.81) or sepsis (038.xx). Patients with continuous enrollment in a fee-for-service Medicare health plan throughout the calendar year, and at least 2 years prior, were included in the study. Age- and gender-adjusted readmission rates were calculated by direct standardization of the U.S. population age ≥65 years in 2010 using gender-specific age groups. RESULTS: The 30-day and 1-year mortality rates increased by 5.9% (17 to 18 per 1,000 person-years) and 13.2% (38 to 43 per 1,000 person-years), respectively, from 2008 to 2012. The overall adjusted readmission rates were 3.82% in 2008, 3.93% in 2009, 3.98% in 2010 and 2011, and 3.17% in 2012. Men had higher readmission rates than women for all study years except 2011. Patients age 65-69 years had the highest readmission rates in 2008 (4.47%), 2009 (4.59%) and 2011 (4.77%). In 2010, patients age 70-74 years (4.41%), and in 2012, patients who were age 75-79 years (3.73%) had the highest readmission rates. Black patients had the highest readmission rates in 2008 (5.08%), North American Natives in 2009 (4.86%), other race in 2010 (5.87%), Hispanics in 2011 (5.70%) and North American Natives in 2012 (7.11%). CONCLUSIONS: Among U.S. Medicare beneficiaries diagnosed with pneumonia, mortality rates were higher from 2009 to 2012 than in 2008. Overall, hospital readmission rates were lower in 2012 than 2008, after adjusting for age and gender. Readmission rates varied across race and age groups.