Medicaid is a program in great need of reducing costs and improving outcomes for its beneficiaries. Medicaid managed care programs can assist in accomplishing both of these goals. Medical homes, developed in conjunction with managed care programs, can provide even greater benefit, particularly for those patients with the greatest needs, such as children, the aged and the disabled. Medical homes provide for enhanced coordination of care, with particular consideration given to each patient’s (and their families’) desires and limitations. Medicaid managed care programs working in conjunction with medical homes could provide significant benefits to patients, as well as federal and state budgets. Quality metrics and evidence-based standards of care designed specifically for children and patients with chronic needs should be developed.