Purpose: This paper reports on Canadian research that examined the cost effectiveness of home care for seniors as a substitute for long-term institutional services. Design and Methods: Two Canadian cities were included in the research: Victoria, British Columbia, and Winnipeg, Manitoba. The research computes the costs of formal care and informal care in both settings and ensures comparable groups of clients in both settings by comparing individuals at the same level of care. Results: The

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... reveal that costs were significantly lower for community clients than for facility clients, regardless of whether costs only to the government were taken into account or whether both formal and informal costs were taken into account. When informal caregiver time is valued at either minimum wage or replacement wage, there was a substantial jump in the average annual costs for both community and facility clients relative to when informal caregiver time was valued at zero. Implications: Nevertheless, the results reveal that home care is significantly less costly than residential care even when informal caregiver time is valued at replacement wage.