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OBJECTIVE: This study investigated the impact of Colorado's Medicaid mental health managed care program on patterns of antipsychotic medication treatment among persons with a diagnosis of schizophrenia. These patterns were compared with patterns of psychosocial treatment and a measure of symptom change. METHODS: Changes in study measures over time in two areas of the state where the policy intervention was implemented were compared with changes in measures in areas where it was not implemented. The study sample consisted of 235 consumers. Measures of antipsychotic medication treatment included any use in a given period, months in which a prescription was filled, and use of second-generation antipsychotics. Psychosocial treatment was measured by any use and expenditures per user. The schizophrenia subscale of the Brief Psychiatric Rating Scale was used to measure consumer outcomes. RESULTS: Probabilities of antipsychotic use in the managed care areas were stable or increased compared with the other areas. The average number of months with filled prescriptions was unchanged. Consumers served under managed care were less likely to use psychosocial treatment, and additional decreases in treatment costs were noted in one area. Difference scores for the schizophrenia subscale showed no change or positive effects for the managed care areas. CONCLUSIONS: Within the Colorado managed care program, antipsychotic medication therapy was not impaired, despite significant decreases in the continuity or intensity of psychosocial treatment, and no reduction in symptom levels was noted. Mental health managed care does not inherently impair medication therapy. Patterns of medication use appeared to be better indicators of program success than psychosocial treatment patterns and were more consistent with outcomes.