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This paper compares health policy trends in Indonesia, Malaysia, the Philippines and Thailand with the purpose of drawing usable lessons in reform. The study finds that governments in the region are rapidly privatizing the provision of healthcare at the same time as they are expanding the government's role in financing. The paper argues that expansion of public financing at the same time as private provision is misconceived as the combination would aggravate instances and severity of market failures peculiar to the sector. The dysfunctional trend is particularly evident in Indonesia and the Philippines. In Thailand, in contrast, the expansion of public financing has occurred in the context of a health system dominated by public providers, which has had the effect of restraining healthcare costs. Malaysia occupies a mid position between Indonesia and the Philippines on the one hand and Thailand on the other. All four cases underline the value of state capacity in designing optimal policies and implementing them effectively. [ABSTRACT FROM AUTHOR]