The tendency in the United States to view the nursing home as an all-purpose solution to the health problems of the elderly has created a set of self-made problems: increased dependency, depression and social isolation among the aged. In the United States, unlike in many European nations, institutional care of the elderly is conceived of and financed as a health service rather than a social service, even though institutional placement provides a complete social context for an individual and obviously constitutes a rather dramatic social intervention. It is also clear that the American method of financing creates disincentives to rehabilitation. Alternatives to nursing home care should be considered, as well as a formula for reimbursing nursing homes to make them more supportive of positive efforts to provide effective care. (Author)