In the late 1980s, Medicaid-insured human immunodeficiency virus (HIV)-infected patients with Pneumocystis carinii pneumonia (PCP) were 40% less likely to undergo diagnostic bronchoscopy and 75% more likely to die than were privately insured patients, whereas rates of use of other, less resource-intensive aspects of PCP care were similar. We reviewed 1395 medical records at 59 hospitals in 6 cities for the period 1995-1997 to examine the impact of insurance status on PCP-related care. Medicaid patients were only one-half as likely to undergo diagnostic bronchoscopy as were privately insured patients, yet we found no evidence that mortality was greater among patients who received empirical treatment. The bronchoscopy rates were primarily related to patients' personal insurance status. A weaker hospital-level effect was seen that was related to hospitals' Medicaid/private insurance case mix ratios. The situation has evolved from one in which Medicaid coverage was associated with underuse of bronchoscopy and poorer survival among empirically treated persons with HIV-related PCP to one in which empirical therapy is effective in treating this disease and expensive diagnostic procedures may be overused for privately insured patients.