OBJECTIVES: To develop nationally representative estimates of rates of diagnosis of depression; to determine rates and type of treatment received by those diagnosed with depression; and to ascertain socioeconomic differences and trends in treatment rates of depression, including the effect of supplemental insurance coverage, for elderly Medicare fee-for-service beneficiaries. DESIGN: Analysis of merged interview and Medicare claims data for multiple years from merged Medicare claims and interview data from the Medicare Current Beneficiary Survey (MCBS), a nationally representative survey of Medicare participants. SETTING: Community dwellers. PARTICIPANTS: Twenty thousand nine hundred sixty-six community-dwelling respondents aged 65 and older in the MCBS cost and use files for 1992 through 1998. MEASUREMENTS: Diagnoses recorded in Medicare claims were used to identify individuals who received a diagnosis of depression from a healthcare provider; pharmacy and claims data were used to identify receipt of antidepressants and psychotherapy by those diagnosed. RESULTS: The rate of depression diagnosis more than doubled, reaching 5.8% in 1998. Overall, about two-thirds of those diagnosed received treatment in each year; but those aged 75 and older, those of "Hispanic or other" ethnicity, and those without additional coverage to supplement Medicare were significantly less likely to receive treatment, controlling for other characteristics. If treated, members of these disadvantaged subgroups were less likely to receive psychotherapy. CONCLUSION: Although depression has been thought until recent years to be underrecognized in the elderly, rates of diagnosis increased dramatically in the 1990s, with concomitant increases in treatment. Nevertheless, significant disparities by age, ethnicity, and supplemental insurance coverage persist in treatment of those diagnosed. Because depression is a major source of potentially treatable morbidity in older people, increased efforts are needed to ensure access to appropriate treatment across all subgroups of older people and to remove economic barriers to treatment.