It was i n e v i ta b l e that the shift to managed care that has swept virtually the entire private health insurance system should also overtake the nation’s public insurance programs. By 1997 about 40 percent of all Medicaid beneficiaries were enrolled in some form of managed care system. Unlike employers who buy care in a deregulated environment, however, Medicaid agencies purchase managed care within one of the most complex laws ever enacted, which reflects more than thirty years of policy decisions regarding the proper role of a government payer for poor, elderly, and disabled persons. As a result, Medicaid’s conversion to managed care faces organizational and legal challenges that have no parallel in the world of employer purchasing. These challenges arise from the nature of the Medicaid population, but more importantly, they spring from the essential nature of the program itself and from the duty of state agencies to reconcile the requirements and standards of Medicaid with the very different structures offered by managed care–style insurers. The central documents that capture and memorialize the extraordinary purchasing challenges that confront Medicaid agencies are the service agreements that agencies negotiate with managed care organizations (MCOs). While a host of federal and state laws apply to theMedicaidmanaged care purchasing process, the service agreements delineate the scope of a state’s expectations of its suppliers. Because state agencies are effectively purchasing exclusive health care delivery systems for beneficiaries, their contracts offer a wealth of insight into agency thinking regarding the key elements of adequately functioning health care systems for the poor. Moreover, in developing their contracts, agencies are called on to interpret and draft with precision and clarity key provisions that tie contractor performance to underlying federal requirements. While federal law requires prior federal approval of all contracts valued at $100,000 or more, actual federal statutory and regulatory requirements regarding the scope and content of state agreements with MCOs are quite limited and vest states with broad discretion to design service systems, coverage, and performance specifications. Because managed care contracts offer such an important primary source of information about the Medicaid program’s transition to managed care, familiarity with the content and structure of these documents is essential to policymakers as well as to persons who study Medicaid managed care systems. We report here on the findings of a study that the Center for Health Policy Research undertook ofMedicaid managed care contracts. n Methodology. Our study is a point-intime study of requests for proposals (RFPs) (which form the basis of contracts in a public procurement system) as well as the standard contracts themselves. A total of forty-five separate contracts and RFPs were collected from thirty-six states and the District of Columbia between July 1995 and January 1996. Contracts included both general service agreements and agreements covering only mental