The combined role as purchaser and provider at the municipality' level is also proposed as important for the resource allocation within the health sector. The paper argues for a closer analysis of the impact of fund-holding, contractual relations and incentives between levels of governments as well as including qualify' indicators in the efficiency measure. These factors imply that a continued growth in health expenditure may increase social welfare. Some measures can be explored to decrease the burden of financing, and to improve welfare for a given level of expenditure. In the medium run, the demand for health care can be crucially influenced by the encouragement of a healthy life style. As discussed by Bolin and by Asgeirsdottir, it is not clear how effective policies should be designed.