This chapter reviews the literature on payment schemes for government purchases of health services. It focuses on four themes: (1) the tension between obtaining appropriate quality of services and keeping the cost of those services at an acceptable level; (2) the role of cost sharing by the payer when there is asymmetric information between purchaser and supplier about costs or case-mix; (3) the importance of committment in purchasing; and (4) the role of reputation in maintaining quality in long term relationships between purchasers and suppliers.
