The mental health care delivery system is undergoing a metamorphosis of unprecedented proportion as managed care covers more and more patients. This dramatic change has its critics (many mental health professionals) and its enthusiastics (the managed behavioral health care companies). Some of these issues are presented in this paper. There is widespread concern that managed care may be applied to the treatment of the mentally ill and substance abusers in ways that neglect the special needs of these populations. The topics covered here include the downside of managed care for patients, such as excessive cost-cutting resulting in compromised treatment, and potential conflicts of interest in health care delivery. Some of the negative consequences of managed care for providers are also detailed, including the perceived interference with the doctor-patient relationship engendered by managed care. Other issues covered are concerns over excessive administrative overhead and profit-taking, complaints that individual providers have about managed care, examples of the frustrations expressed by an insider in managed care provider, attrition among managed care providers, the need for better research, and some of the protests and reforms being advocated. Specific concerns include issues of privacy, utilization review, a lack of efficiency, the "gatekeeper" function, questions of accountability, and concerns for the quality of treatment. (Contains 26 references.) (EMK)