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PAHO Bulletin. 1988; 22(4):416-29.This article, which is a summary of a World Bank policy study, states that the characteristics and performance of health sectors vary tremendously in developing countries. In most cases, the sector faces three main problems: insufficient spending on cost-effective health activities; internal inefficiency of public programs; and inequity in the distribution of benefits from health services. It is argued that each of these problems is due in part to the efforts of governments to cover the full costs of health care for everyone from general public revenues. Proposed policy reforms include: charge users of government health facilities; provide insurance or other risk coverage; use nongovernmental resources effectively; and decentralize government health services. However, it was pointed out that further analysis is needed on these proposed reforms.