BACKGROUND: In 2006, dual-eligible nursing home residents were randomly assigned to a Medicare Part D prescription drug plan (PDP). Subsequently, residents not enrolled in qualified plans at the start of the next year were rerandomized. PDPs vary in generosity through differences in medication coverage and utilization management. Therefore, residents' assigned plans may be relatively more or less generous for their particular drugs. The impact of generosity on residents' medication use and health outcomes is unknown. METHODS: Using data from 2005 to 2008, we estimated logistic regression models of the impact of coverage and utilization management on the risk for medication changes and gaps in use, hospitalizations, and death among elderly nursing home residents using 1 of 6 selected drug classes, adjusting for patient characteristics. RESULTS: Few current medication users faced noncoverage of their drug (0.4% to 8.7%) or prior authorization or step therapy requirements if the drug was covered (1.1% to 37.4%). After adjusting for individual-level covariates, residents with noncovered drugs were more likely than residents with covered drugs to change medications in most classes studied (eg, for 2006 angiotensin receptor blocker users, the adjusted average probability of medication change was 0.35 when uncovered vs. 0.11 when covered). Those subjected to prior authorization or step therapy were more likely to change in a subset of classes. There were no statistically significant differences in the rates of hospitalization or death after correcting for multiple comparisons. CONCLUSIONS: The Part D benefit's special protections for nursing home residents may have ameliorated the health impact of coverage limits on this frail elderly population.