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Objective: To compare the costs of Community Nursing Homes (CNHs) to Medical Foster Homes (MFHs) at Veteran Health Administration (VHA) Medical Centers that established MFH programs. Data Sources: Episode and costs data were derived from VA and Medicare files (inpatient, outpatient, emergency room, skilled nursing facility, dialysis, and hospice). Study Design: Propensity scores matched 354 MFH to 1693 CNH Veterans on demographics, clinical characteristics, health care utilization, and costs. Data Extraction Methods: Data were retrieved for years 2010-2011 from the VA Corporate Data Warehouse, VA Health Data Repository, and the VA MFH Program through the VA Informatics and Computing Infrastructure (VINCI). Principal Findings: After matching on unique characteristics of MFH Veterans, costs were $71.28 less per day alive compared to CNH care. Home-based and mental health care costs increased with savings largely attributable to avoiding CNH residential care. When average out-of-pocket payments by Veterans of $74/day are considered, MFH is at least cost neutral. Mortality was 12 percent higher among matched Veterans in CNHs. Conclusions: MFHs may serve as alternatives to traditional CNH care that do not increase total costs with mortality benefits. Future work should examine the differences for functional disability subgroups. KEYWORDS adult foster care, health care costs, long-term care, Veteran, 1 | INTRODUCTION In fiscal year 2012, 9 percent of VA health care spending, $4.9 billion of VA's $54 billion budget, was spent on long-term care (LTC). (1) While the [...]