This paper examines the extent to which five states are becoming "prudent purchasers" in their oversight of Medicaid managed care. Our conclusions are mixed. These states are making more sustained efforts along these lines than most private purchasers are and have improved the amount and quality of the data they collect on the experiences of Medicaid clients when compared with the traditional fee-for-service program. They have been less successful in ensuring data quality that is adequate to support contracting decisions and in developing the analytical or political capacity to use data to "manage" the managed care system. Becoming a prudent purchaser appears to be a complex task for states that may prove difficult to achieve.