In light of increasing pressures to reform the compulsory long term care insurance, the committee in charge of reforming the social insurance system, recommended to exploit any potential for rationalising the existing insurance system. Among other measures, the committee proposed to introduce direct payments to the elderly who receive ambulant long term care as an alternative kind of insurance benefits. Direct payments are a special kind of cash benefit that enables the benefit recipient to purchase a bundle of individually tailored long term care services. The intention is to activate a higher degree of flexibility and consumer-orientation among the long term care service providers. In this way, one hopes to prolong the provision of ambulant long term care and thus reduce the time spent in costly nursing homes.On behalf of the insurance companies and legally based on §8 III SGB XI, a pilot project has now been launched to provide a basis for evaluating the impacts of this alternative kind of insurance benefits. Seven communities spread all over Germany participate in this pilot project. Starting in autumn 2004, they introduce direct payments as an alternative to in-kind payments to the elderly in ambulant long term care. The pilot project is designed as a social experiment. Thus, one integral part of the project is to randomly select a treatment group of individuals who receive direct payments and a control group of individuals who receive the usual in-kind benefits. Ongoing data collection of both the treatment and the control group makes it possible to comprehensively evaluate the impacts on the cost and quality of ambulant long term care at a high scientific level. In this context, ZEW together with FIFAS are in charge of the scientific design and evaluation of the pilot project. Internal coordination of the pilot project lies in the responsibility of EFH Freiburg.