To explore managed care plans' efforts to assess and improve quality of care for Medicare beneficiaries, the authors surveyed managed care plans with risk contracts for Medicare beneficiaries in 20 large metropolitan areas in January 1998. The survey inquired about: (1) the health plans' efforts to assess and improve quality of care for specific underuse, overuse, and misuse problems; (2) how the health plans assessed functional status of enrollees, and (3) the quality improvement program they believed had the greatest impact on the health of enrollees. The managed care plans reported a heterogeneous mix of quality improvement activities ranging from poorly developed to very sophisticated. The vast majority of the more sophisticated programs addressed problems with underuse of services rather than overuse or misuse.