States have demonstrated that it is possible to improve care for the elderly and contain costs at the same time. Notable examples of this success are the creative home- and community-based waiver and state-funded programs operating in Wisconsin, Oregon and Washington, which have shown that people who are nursing home certifiable can be given the less restrictive services they prefer at a cost lower than nursing home care. Yet these programs and others operated by states in every part of the country can only go so far before they bump into the Medicare wall. When an elderly person needs acute care services (as they frequently do), they enter a different part of the service delivery system where Medicare is the major payer. Typically, this part of the service system is disconnected from the long-term care portion, making transitions abrupt and traumatic for consumers. Rather than working together for the maximum benefit of consumers, each part of the system is motivated to guard its resources jealously, shifting patients and their costs to the other part of the system rather than managing those costs. Naturally, this completely predicatble economic behavior leads to mistrust, making coordination even more difficult.