State Medicaid programs transfer over $100 billion to private firms to manage the health care needs of beneficiaries every year. As a result of state policy choices, there is a great deal of variation among the states in the scope and use of managed care organizations to serve state Medicaid populations. This research answers the questions about what factors help to explain the variations among states; with a specific emphasis on both the role of interest group populations and bureaucratic

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... ity. The questions posed are answered utilizing pooled, cross-sectional time series analysis from 1997 to 2007 to test the relationship between Medicaid managed care policy choices and a variety of political, economic, demographic and governmental control variables. The findings from the models suggest that interest groups play an important role in explaining why states choose to use commercial for-profit managed care arrangements. The models also find that states with higher levels of bureaucratic capacity tend to rely less on the use of all forms of managed care in Medicaid contracting, and that state specific managed care markets are positively related to state managed care policy choices.