Major milestones in the evolution of nursing home care in the United States between 1960 and 1985 were the introduction of Medicaid and Medicare (resulting in a rapid growth in beds), national health planning (slowing the growth of beds), and prospective payment system for hospitals (shifting the case mix to a more disabled population). Critical policy concerns for nursing home care in the mid-1980s were the appropriate mix of public and private expenditures, impoverishment of some elderly persons as a result of long stays, improvement of the quality of care, and the funding bias toward institutional longterm care. Policy changes in the past few years have addressed quality by requiring a standard assessment linked to a care plan, although quality remains a major issue. Recent policies creating home care and community-based care programs may signal a shift away from institutional care. The issues of impoverishment and of the appropriate mix of expenditures are unresolved. Nursing homes certified by Medicaid and Medicare differed from those not certified in providing more services, having more nursing staff, and having more residents with disability and behaviour problems. Between 1985 and 1994, there were some significant changes in sources of funding for national nursing home expenditures. Out-of-pocket expenditures dropped, while government expenditures rose, with the increase occurring in the federal-government share.