Elderly and handicapped persons currently receive special transportation assistance through a variety of programs at federal, state, and local levels of government. The different agencies administering these programs tend to work independently of one another, often duplicating transportation facilities and incurring unnecessary costs. User-side subsidies offer a means for reducing the costs of current transportation programs for the elderly and handicapped by placing the subsidy funds directly in the hands of the users and encouraging them to select the providers of their choice. This paper describes the application of the user-side subsidy approach in selected urban areas and discusses some of the obstacles to more widespread use of this technique. It is concluded that by earmarking funds for certain provider types and for certain types of transportation expenditures legislators have created serious barriers to the provision of efficient transportation services for the elderly and handicapped. Even with these legislative constraints, however, agencies administering transportation programs could reduce transportation costs significantly through greater use of the user-side subsidy technique. (Author)