The root causes of regional variation in medical spending are poorly understood and vary by clinical condition. To identify drivers of regional spending variation for Medicare patients with advanced cancer, we used linked Surveillance, Epidemiology, and End Results (SEER) program–Medicare data from 2004–10. We broke down Medicare spending into thirteen cancer-relevant service categories. We then calculated the contribution of each category to spending and regional spending variation. Acute hospital care was the largest component of spending and the chief driver of regional spending variation, accounting for 48 percent of spending and 67 percent of variation. In contrast, chemotherapy accounted for 16 percent of spending and 10 percent of variation. Hospice care comprised 5 percent of spending; however variation in hospice spending was fully offset by opposing variation in other categories. Our analysis suggests that the strategy with the greatest potential to improve the value of care for patients with advanced cancer is to reduce reliance on acute hospital care for this patient population.