Summary: This study measures the effect of spending policies for long-term care services on the risk of becoming a long-stay nursing home resident after a hip fracture. Relative spending on community-based services may reduce the risk of long-term nursing home residence. Policies favoring alternative sources of care may provide opportunities for older adults to remain community-bound. Introduction: This study aims to understand how long-term care policies affect outcomes by investigating the effect of state-level spending for home- and community-based services (HCBSs) on the likelihood of an individual’s nursing home placement following hip fracture. Methods: This study uses data from the 5 % sample of Medicare beneficiaries from 2005 to 2010 to identify incident hip fractures among dual-eligibility, community-dwelling adults aged at least 65 years. A multilevel generalized estimating equation (GEE) model estimated the association between an individual’s risk of nursing home residence within 1 year and the percent of states’ Medicaid long-term support service (LTSS) budget allocated to HCBS. Other covariates included expenditures for Title III services and individual demographic and health status characteristics. Results: States vary considerably in HCBS spending, ranging from 17.7 to 83.8 % of the Medicaid LTSS budget in 2009. Hip fractures were observed from claims among 7778 beneficiaries; 34 % were admitted to a nursing home and 25 % died within 1 year. HCBS spending was associated with a decreased risk of nursing home residence by 0.17 percentage points (p 0.056). Conclusions: Consistent with other studies, our findings suggest that state policies favoring an emphasis on HCBS may reduce nursing home residence among low-income older adults with hip fracture who are at high risk for institutionalization.