Nearly every state now encourages (or requires) its Medicaid beneficiaries to enroll in managed care. There is, however, extraordinary variation in every aspect of state managed care policy. In this article, I examine the managed care initiatives of two states, New York and California, and focus on variation in state policy-making environments and on the influence of such variation on efforts to protect the medical safety net. I conclude that California’s managed care initiative is less decentralized and pluralistic than New York’s, and that California has used its discretion to adopt a strategy designed in part to protect safety-net hospitals. I end with a plea for greater federal control of managed care initiatives, a policy proposal that is at odds with the current trend to increase state authority.