This paper examines the medicalization of community-based services for the elderly; a process of restructuring to provide more highly medical services to a frail older population at the expense of providing a broader range of social and supportive services to older persons with varying levels of need. Medicalization is tied to changes in government policy (particularly Medicare reimbursement) which have led to increased competition within the health and social service sector. The paper utilizes data on services, policy impact and staffing from the DRG Impact Study conducted at the Institute for Health and Aging (UCSF), a 3-year study of the impacts of federal policy on 7 types of community providers of services to the elderly. Data are presented from telephone interviews conducted at two points in time (1986 and 1987) with directors of a representative sample of home health agencies (HHAs). Findings include: HHAs were more likely to report adding highly medical services and cited social/supportive services (as opposed to highly medical and/or highly technical services) as the most commonly requested services they cannot provide. Policy effects and societal implications of the medicalization of home care are considered.