Evaluations of home care for chronically ill elderly people have shown disappointing results for many years. Improvements in outcomes have been slight and costs high. The authors offer a system for setting budget targets based upon effectiveness of home care in mitigating certain adverse outcomes, the risk of those outcomes occurring, and the economic value of avoiding those outcomes. They believe that such a budgeting system will encourage improved measurement of outcomes and more rigorous justification for expenditures. Moreover, such a system is designed to reallocate resources to higher-risk patients and those more likely to benefit, focusing caregiving on specific outcomes and improving those outcomes.