Two long-term care settings not now covered by Medicare--adult day care and homemaker services--were studied in a randomized experiment to test the effects on patient outcomes and costs of using these new services. This article reports findings for day care. Patients' physical, psychosocial and health functions were assessed quarterly, and their Medicare bill files were obtained. Medicaid data were obtained on most patients, but few used many Medicaid-covered long-term care services. Multistage analysis was performed to mitigate effects of departures from the randomized design. Day-care patients showed no benefits in physical functioning ability at the end of the study, compared with the control group. Institutionalization in skilled nursing facilities was lower for the experimental group than the control group, but the factors other than the treatment variable appeared to explain most of the variance. There was a possibility that life was extended for some day-care patients. the new services averaged $52 per day or $3,235 per year. When costs for existing Medicare services used were added, the yearly cost of the experimental group was $6,501, compared with $3,809 for the control group--an increase of $2,692 or 71 per cent.