Long-term care for the aged in the United States is overly dependent upon the nursing home. This hospital-like model for long-term care is particularly inappropriate since it imposes a medical solution on a variety of social problems. An adequate long-term care program requires a range of resources in the community as well as in institutions; sheltered housing options seem a desirable alternative to the nursing home. To ensure the quality of nursing home care, the present focus on setting standards for care activities should be abandoned in favor of a focus on care outcomes (physical, mental, and social). In an effort to change our present perverse incentives in the nursing home industry, the proposal is made that nursing homes be reimbursed according to the degree to which patient outcomes meet predicted outcomes.