OBJECTIVES: To estimate resource use and costs associated with a diagnostic workup for suspected breast cancer among female Medicare beneficiaries. METHODS: We used Medicare 5% sample claims data to select non-HMO women =65 who had either a suspicious mammogram (Group A) or signs or symptoms of breast cancer (Group B), but no evidence of active treatment of any prior cancer, in the first 3 quarters of 2004. We then measured their resource use and costs associated with a pre-defined set of relevant breast cancer diagnostic services. RESULTS: Our sample included 45,978 women (19,769 Group A, 26,209 Group B). On average, women presenting for a breast cancer diagnostic workup received 1.4 diagnostic mammograms, 1.0 pathology services, 0.6 radiology services, and 0.5 other breast imaging studies, among other services. The average cost of a diagnostic workup – whether it eventuated in a breast cancer diagnosis or not - was $361, and was nearly identical between groups ($363 Group A vs. $359 Group B), although breast biopsy was a more important determinant of costs for patients in Group A. We estimate that Medicare spends approximately $649 million annually on diagnostic workups for women with suspected breast cancer, and that false positive mammograms result in costs of approximately $250 million. CONCLUSION: Resource use and costs of diagnostic workups for women presenting with suspicion of breast cancer are substantial.