Capitation financing for the delivery of mental health care under public programs is receiving increasing attention from policymakers. Most initiatives in this respect are in the planning or early implementation stages. This paper describes five years of experience with capitated financing for mental health care in the state of Rhode Island. It discusses the motivation for the programs, their design, and the issues that have arisen with respect to their operation. The Rhode Island experience demonstrates that capitated financing for mental health care is feasible and that Community Mental Health Centers can operate effectively as providers of care under these arrangements. It also suggests that capitated programs can have unanticipated impacts on the operation of community-based mental health service delivery programs.