This paper examines within an international context, the healthcare system in Hungary. While the system resembles in many of its broad features those of other OECD countries, Hungarians have the lowest life expectancy in the OECD and its rate of increase over the last 20 years has been much slower than in the rest of the area. The Hungarian health system is relatively resource intensive and is characterised by high hospitalisation rates, an excess supply of specialists and perverse incentives both for doctors and hospital administrators. Budgetary rules prevent hospitals from properly amortising investments and limit their capacity to manage labour costs. Furthermore inadequate supervision of billing by the state administrator has led to a fraudulent inflation in both the number and the “seriousness” of treatments. Recent reforms have concentrated on containing costs but efforts to improve service delivery and health outcomes have been plagued by problems of institutional conflict ...