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Nursing home care is currently a two-tiered system. The lower tier consists of facilities housing mainly Medicaid residents and, as a result, has very limited resources. The nearly 15 percent of U.S. nonhospital-based nursing homes that serve predominantly Medicaid residents have fewer nurses, lower occupancy rates, and more health-related deficiencies. They are more likely to be terminated from the Medicaid/Medicare program, are disproportionately located in the poorest counties, and are more likely to serve African-American residents than are other facilities. The public reporting of quality indicators, intended to improve quality through market mechanisms, may result in driving poor homes out of business and will disproportionately affect nonwhite residents living in poor communities. This article recommends a proactive policy stance to mitigate these consequences of quality competition.