Efforts are being made to shift federal financing of long-term care of the elderly from a medical to a health model. The forces of fiscal constraints and an aging population are precipitating a crisis in the current government-financed medical model of long-term care that fosters sending the elderly to institutions. Problems associated with this approach are stimulants to the development of an alternative health model that incorporates nursing, medical, and social components of long term care. Selected government-sponsored research in this area has implications for policy. Although project results have been inconclusive in terms of cost effectiveness, they have inspired legislative proposals to effect changes. Several federal bills have potential effects on service delivery and nursing practice in the home and community. Consideration of the issues, proposals, and political climate forms the foundation for strategies to monitor policy options, protect nursing's practice arena, and initiate desired alternatives. Nurses are urged to acquire the information, political skill, and networking capability to become powerful advocates of reimbursement changes that will support consumer needs and the profession's advancement.