This proposal is to study the home health and the nursing home markets for Medicare and Madicaid services in fifty states, using the state as the unit of analysis. The study examines the effects of demand variables including demographic, economic, social, and other related variables as well as supply factors including those that influence the number of providers and services available. State public policies will be described including eligibility, utilization controls, reimbursement methods, and certificate-of- need. The model estimates will focus on: access tro services, provider capacity, utilization, and rates, which can be used to explain Medicare and Medicaid expenditures. The study will use secondary data from Medicar and Medicaid and other sources and will collect primary data on state policies and bed supply for the period of 1986-88. By building upon previous HCFA and NCHSR studies, the project will develop a ten-year cross sectional time series data base of both secondary and primary data for 1978-88. The descriptive analysis will provide valuable new primary data on state Medicaid nyrsing home and home health reimbursement rates and methods and total state nyrsing home bed supply not available from other sources. A pooled cross-sectional time series regression analysis will be conducted to examine differences within the ten- year time period. And finally, the analytical work usaes both integral and dynamic equation models of the home health and nursing home markets. The papers from the study will be designed for policy makers to consider in making changes in Medicare and Medicaid program policies.