Following the transition from central planning toward market-based economies, the formerly communist states of Central and Eastern Europe introduced a number of reforms in the finance, management, and organization of the health sector. While health sector reforms in these countries have involved deep structural changes, they have generally been less successful in improving efficiency, enhancing equity in healthcare financing and delivery, and managing clinical quality of health services. Total health expenditures have increased in almost all countries, especially in recent years, and with revenues not keeping pace, huge debts have accumulated in the health sector. Efficiency gains have been few and far between, and with the dynamic nature of technology and demographic changes increasing the complexity of health services and the health marketplace, further reforms are becoming even more difficult. This report takes stock of recent trends in health expenditure aggregates in the public sector and identifies specific areas of health expenditure reform consistent with the objectives of stabilizing the fiscal situation in these countries (the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia) without adversely affecting the production, delivery and utilization of health services.