Family planning services represent one of the most common managed care services, particularly in the case of Medicaid. In 1986, Congress enacted legislation exempting family planning services from mandatory managed care requirements. The effect of this legislation was to permit beneficiaries enrolled in mandatory managed care plans to continue to obtain family planning benefits from the providers of their choice, regardless of the providers’ network status. The purpose of the law was to assure that managed care would not impede individuals’ access to benefits. Subsequent experiences surrounding implementation of this provision indicated that the Health Care Financing Administration failed either to define the scope of the exemption or to provide guidance to states regarding the various issues that would have to be resolved in exempting certain primary care services from mandatory managed care. States, in turn, developed working definitions of exempt family planning services that omitted treatment for sexually transmitted diseases and also delegated to their managed care contractors the responsibility to design implementation and payment arrangements. This systematic failure to articulate the scope and functional elements of the exemption consequently led to nonpayment of providers, and ultimately, to denial of care in some cases. Moreover, plans and community providers alike relied on the exemption to justify their failure to come to grips with the requirements and challenges of managed care. We conclude that exempting primary care services from managed care requirements may raise as many questions as it answers, and instead recommend that states, plans, and community providers focus on developing managed care systems that are responsive to patient needs.