Nursing homes are increasingly providing rehabilitative care to short-stay residents under Medicare’s skilled nursing facility coverage, which is much more generous than Medicaid’s coverage for long-stay residents. This shift creates the potential for both beneficial and detrimental effects on outcomes for such residents. Examining nationwide facility-level nursing home data for the period 2007–10, we found that increasing the proportion of Medicare-covered patient days in a nursing home was significantly associated with improvements in the quality of the three outcomes we considered for long-stay residents. We saw significant decreases in the percentages of long-stay residents with daily pain (from 5.1 percent to 3.4 percent), with worsening pressure ulcers (from 2.5 percent to 2.0 percent), and with a decline in performing activities of daily living (from 15.9 percent to 14.9 percent). These findings reinforce previous research indicating that quality outcomes tend to be superior in nursing homes with greater financial resources. They also bolster arguments for financial investments in nursing homes, including increases in Medicaid payment rates, to support better care for long-stay residents.