Objective. To examine the existence of selection bias in the first 3 years of the Minnesota Senior Health Options (MSHO) demonstration and to estimate the MSHO effects on medical services utilization after adjusting for selection bias. Data Sources. Monthly dual eligibility data and MSHO encounter data of March 1997-December 2000 and Medicaid encounter data of January 1995-December 2000 from the Minnesota Department of Human Services; Medicare fee-for-service claims data of January 1995-December 2000 from the Centers for Medicare and Medicaid Services. Study Design. Quasi-experimental design comparing utilization between MSHO and control groups; multiple econometric and statistical models were estimated with time-invariant and time-varying covariates. Principal Findings. Favorable MSHO selection was found in the nursing home (NH) and community populations, but selection bias did not substantially affect the findings. Enrollment in MSHO for more than 1 year reduced inpatient hospital admissions and days, emergency room and physician visits for NH residents, and lowered physician visits for community residents. Conclusions. There was favorable selection in the first 3 years of the MSHO program. Enrollment in MSHO reduced several types of utilization for the NH group and physician visits for community enrollees.