Since its independence in 1991, the Republic of Macedonia became a highly centralized state, with most relevant decisions taken at the central level in Skopje, resembling the highly centralized system, which once characterized Former Yugoslavia. As agreed in the Framework Agreement, which ended six months of internal conflict, the Macedonian Government will decentralize public services delivery, including social protection, health, education, and infrastructure over the course of the next few years. Within health care, it is argued that by placing policy-making authority and operating control closer to the client, decentralization will reduce some of the inequities in service provision and inefficiencies present within the current centrally controlled system. In principle, local voters will have more information on the price and quality of services, thereby increasing competition in the sector and strengthening the private sector. The emphasis on market incentives resulting in greater efficiency and better management of health care institutions is viewed as one of the benefits of privatization. Critics of decentralization and the subsequent privatization of public services fear it may result in an erosion of quality and consistency across regions, leaving some regions, cities, villages and potentially vulnerable groups worse off than others. The paper argues that if the institutional weaknesses in Macedonia have not been addressed, decentralisation could result in further excluding the rural population from health care provision. Similarly, the need for a clear delineation of responsibilities and functions among different levels and institutions is outlined. Copyright © 2006 John Wiley & Sons, Ltd.