The story of the development of the Maryland Medicaid Diabetes Care Pr
ogram is narrated in this policy case study. Maryland Medicaid, a fund
ing authority willing to assume a proactive role, decided to promote h
ealth care system changes expected to improve the health status of its
recipients with diabetes. A state Medicaid budget crisis presented op
portunities for financing new and expanded preventive services for tho
se with this chronic disease. Specifically recounted is how Maryland M
edicaid redefined its financing boundaries in an effort to overcome fi
nance induced fragmentation in diabetes health care delivery. The diff
iculties encountered by a single payer in moving unilaterally to alter
health care practices are discussed. Two commentaries follow.