This article reviews the history, growth, and evolution of managed care in mental health and substance abuse treatment. Specific issues described are stigma, the important social dimensions and chronicity of some types of mental illness and chemical dependency, and reliance on the public sector for care. Opportunities and challenges for occupational therapists in the rapidly changing mental health system are discussed, including the use of interdisciplinary teams, the importance of measuring functional outcomes of interventions, the need to develop clinical guidelines, the importance of the community setting and a continuum of services, ethical dilemmas, and the importance of assertive occupational therapy advocacy and involvement in health care reform.