Nowadays, managed care has taken over the management of the Medicaid program in most states of the nation. The patients treated in the public sector managed care system are very vulnerable and at high risk. Thus, we decided to measure the impact of managed care in the public-sector population of Texas. To this end, we assessed the treatment outcome at the Harris County Psychiatric Center (HCPC). Our results showed that after the implementation of the Medicaid managed care program in Houston, the bed utilization at HCPC decreased by 32% and the readmission rate increased by 21%; concomitantly, the length of stay decreased from 15.6 days to 9.3 days. Additionally, African-American and Hispanic-American patients were more negatively affected than Caucasian patients. Undoubtedly, the implementation of the Medicaid managed care system in Texas has led to untoward effects in the quality of care provided to the most disadvantaged population of the state.