We collected surveillance data as part of the Medicare Influenza Vaccine Demonstration to describe communitywide epidemiology of influenza, focusing on the elderly. Laboratory-based surveillance was established in medical practices, hospitals, and nursing homes in a two-county demonstration in upstate New York. Time course and intensity of epidemic influenza were compared between counties, between influenza A and B epidemics, and among several levels of surveillance involving elderly persons as well as children during the years 1989-1992. The counties experienced parallel epidemics during each of the three demonstration years. Influenza A/H3N2, predominant in 1989-1990 and 1991-1992, was equally intense among young and old, accounted for 11%-28% of acute cardiopulmonary hospitalizations of older persons, and caused focal outbreaks in 30%-40% of nursing homes in the respective epidemics. Influenza B, predominant in 1990-1991, showed modest impact among the elderly as compared with children. Influenza A/H1N1 occurred among children each year but was virtually absent among the elderly. Systematic surveillance during the "influenza season" consistently confirms widespread infection among older patients, both in the community and in institutions. However, much febrile respiratory illness in this age group during periods of epidemic influenza is culture-negative for influenza virus and thus may be caused by other respiratory pathogens.