About 1 to 1.5 percent of a state's total child population are low-income children eligible for Medicaid. While Medicaid alone cannot pay for the full continuum of therapeutic and support services needed by these children, it is an important resource for states to use in developing and financing a comprehensive, community-based system of care. Before State mental health planners can capitalize on the financial opportunity afforded by Medicaid, they must overcome some problems inherent in the program. The first task is to decipher the many complexities of Medicaid legislation and regulations, including information on eligibility, benefits, and reimbursement rates. Another barrier states face is the sometimes adversarial relationship between the State mental health agency and the Medicaid program. Cooperation is important in order to develop a State mental health plan, State Medicaid plan amendments, and State government structure. The Medicaid service benefits available to states include clinic services, early and periodic screening, and case management. States are encouraged to continue the dialogue started in this workshop between Medicaid and mental health agencies. 6 notes, appendix, bibliography.