Health care in the Netherlands presents a unique mix of governmental and private responsibilities. Costs for long-term care, expensive treatments and uninsurable care for the complete Dutch population are covered by the Exceptional Medical Expenses Act (AWBZ), administered by 32 regional offices. Every health care provider operates under a contract with the regional administration office. Once contracted services are available, insurers are obliged to reimburse providers for these services even if they are not used by clients. In the coming years part of the Dutch health care will be deregulated and several types of care will be offered under market conditions. Whereas costs for care capacity are at present reimbursed by the government, this situation might change in the future. Regional care offices in general have little insight into long-term developments in supply and demand for health care. This paper describes a system dynamics study on demand and supply for a specific type of nursing care, dementia. The model shows how feedback between waiting lists and volume of different types of demand for care, leads to fluctuations in required capacity. The feared overshoot in long term nursing capacity did not materialize in model runs under a range of environmental scenarios.