The current Chilean government adopted a neoclassical model of development and subsequently introduced various incentives for the privatization of medical care. This paper analyzes health care financing in Chile during the last decade and evaluates government efforts to minimize state-financed medical care. In so doing, this paper provides a framework for analyzing private vs public medical care delivery systems in developing countries. For this reason, the first section discusses the major attributes and issues of public and private delivery systems followed by a case study examining the origins, effectiveness and impact of the restructured health system in Chile.