This study uses a nationally representative sample of nursing homes and nursing home residents to examine the effect of Medicaid reimbursement on quality of care. The analysis shows that both reimbursement approach and level affect nursing home quality, as measured by case-mix adjusted staff to resident ratios. The analysis also shows that staffing ratios have a significant impact on resident outcomes, and these impacts vary by professional category of staff. Reimbursement does not have a significant impact on outcomes, however.