Profiles of case mix and related variables were compared for 1,064 Medicaid and 459 non-Medicaid residents of 65 freestanding nursing homes in Colorado in 1980. The results point to substantial case-mix differences, with Medicaid residents typically characterized by fewer and less intense long-term care problems as well as greater independence in functioning (ADLs). Policy impacts of these findings in Colorado have included a legislatively mandated home and community-based care program as well as a more stringent preadmission certification program for Medicaid clients. The method of comparing Medicaid and non-Medicaid case mix in nursing homes appears to have policy relevance for other states as well. Research implications in the areas of measuring severity of long-term care problems and measuring residents' functional abilities apart from services received are also suggested.