This paper presents results of a study to determine 1) the effects of Medicare on the patterns of hospital use in specific disease groups, and 2) the sensitivity of length of stay and proportions of admission in specific disease groups to “short-run” changes in hospital occupancy rates. The analysis indicates that Medicare did increase utilization of hospital services by patients 65 and over through increases in both admissions and average length of stay. The largest increases occurred in the lower risk disease categories, although it is pointed out that this result does not necessarily imply a misallocation of hospital resources. The results also indicate significant differences among different socioeconomic groups and a much greater initial impact on the 75 and over age group than on the 65–74 age group.