Purpose: This research examines the impact of rural-urban residence on formal home-care utilization among older people and determines whether and how Medicaid coverage influences the association between, rural-urban location and risk of formal home-care use. Design and Methods: We combined data from the 1998 consolidated file of the Medical Expenditure Panel Survey Household Component with data from the Area Resource File to generate the analytical data set. We established two measures of formal home-care utilization: home care reimbursed through any source, and Medicare-reimbursed home health care. Our measures of rural-urban residence included metropolitan counties, nonmetropolitan counties having towns of at least 10,000 people, and nonmetropolitan counties with no towns of 10,000 people. We used logistic regression analyses to examine main effects and interaction effects of Medicaid coverage and residence on the two types of formal home care under controls for person-level characteristics and state fixed effects. Results: The unadjusted logistic analyses demonstrate that older people who reside in the most rural counties (nonmetropolitan counties having no town of 10,000) are significantly more likely than metropolitan residents to use any formal home care and Medicare home health care. The fully adjusted logistic analysis results point to an interplay between residential status and Medicaid coverage with regard to formal home-care use. In comparison with metropolitan residents covered by Medicaid, the adjusted relative risk of any formal home-care use is significantly higher for Medicaid enrollees residing in nonmetropolitan counties having no town of 10,000 people. Use of Medicare home health care is significantly greater for residents of the most rural counties, irrespective of their Medicaid coverage, as well as Medicaid-covered residents of nonmetropolitan counties having a town of at least 10,000 people. Implications: In nonmetropolitan areas, Medicaid may be an important mechanism for linking older individuals with formal home care, especially Medicare home health care, and with the services that generate formal home care. Formal home care, including Medicare home health care, may substitute for less available forms of care in the most rural of nonmetropolitan areas. Therefore, policies that limit access to formal home care could lead to increased service-related vulnerabilities among older rural residents.