Ten percent of the Texas population is 65 and older. The state has a large, rapidly growing elderly population, estimated to reach 4.4 million, or 16.1% of the state’s total population in 2025. Medicaid spending for long-term care in FY2001 was $3.3 billion – 28.5% of all Medicaid spending. Medicaid spending for institutions was more than 70% of Medicaid long-term care spending and more than 20% of all Medicaid spending in F Y2001. Spending for home and community-based services has increased rapidly in recent years and represented 29.2% of Texas long-term care spending in FY2001, primarily due to increased use of the Medicaid Section 1915© home and community based waiver program. From FY1990 to FY2001 spending for this program increased from less than 1% to over 21% of all Medicaid long-term care spending in Texas. Texas provides a wide range of services in the home and community to about 100,000 adults with disabilities. Despite this, the state has significant overcapacity in its nursing home industry. As a result, the nursing home occupancy rate is quite low – 68.5% in 2000. The state continues to serve many persons with developmental disabilities in large state institutions and has no plans to close any facilities in the foreseeable future. Interviews with state officials and a review of state reports highlighted a number of issues including: an imbalance in Medicaid financing favoring institutional care, rather than home and community-based care; a shortage of frontline long-term care workers; and waiting lists for home and community-based services.