A growing body of evidence documents pervasive racial, ethnic, and class disparities in long-term care in the United States. At the same time, major quality improvement initiatives are being implemented that rely on market-based incentives, many of which may have the unintended consequence of exacerbating disparities. We review existing evidence on disparities in the use and quality of long-term care services, analyze current market-based policy initiatives in terms of their potential to ameliorate or exacerbate these disparities, and suggest policies and policy modifications that may help decrease disparities. We find that racial disparities in the use of formal long-term care have decreased over time. Disparities in quality of care are more consistently documented and appear to be related to racial and socioeconomic segregation of long-term care facilities as opposed to within-provider discrimination. Market-based incentives policies should explicitly incorporate the goal of mitigating the potential unintended consequence of increased disparities.