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PROLOGUE: After turning to managed care to hold down costs, states found that they needed to shed their regulatory mentality toward Medicaid services and learn to implement policy through the contracting process. Theoretically, contracting relieves both states and service providers of a trying, micromanagerial relationship and creates a conceptually satisfying single point of accountability.In practice, states must build new capabilities to monitor and assess health plan performance. Their new role as hard-nosed purchaser has to be balanced with the traditional responsibility to protect and serve the disadvantaged, and plans can walk away if states push too hard. Nor does the "prudent purchaser" model provide much guidance for

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