BACKGROUND: This study investigated the differences in the risk of potentially avoidable hospitalization (PAH) among eligible long-term care insurance (LTCI) beneficiaries with dementia for LTCI services in Korea. Nested case-control study was conducted using the National Health Insurance Service-Senior claim database. METHODS: Cases of individuals who had a PAH incident diagnosis and controls were selected by incidence density sampling and matched to cases based on age, sex, and difficulty of daily living among dementia patients. We conducted incidence density sampling three times by PAH type. RESULTS: Our main results were presented by conditional logistic regression analysis for the matched case-control studies. Out of the 7,352 eligible LTCI beneficiary patients, there were 1,231 cases (16.7%) in overall PAH, 132 cases (19.0%) in acute PAH and 1,114 cases (16.7%) in chronic PAH categories. In terms of individual risk of overall and chronic PAH, the odds ratios of those who did not receive any services were 1.336 time higher (95% confidence interval [CI], 1.159-1.540) and 1.280 time higher (95% CI, 1.103-1.485) compared to those who received home care, respectively. For risk of acute PAH, the odds ratios of those who did receive institutional care were 2.046 time higher (95% CI, 1.170-3.578) compared to those who received home care. CONCLUSION: This study identified the differences in risk of PAH incidents according to the type of LTCI service in the elderly population in Korea. Therefore, it will require substantial effort and strategy from health policy makers to improve care quality.