The political and economic transition of the 1990s in the countries of central and eastern Europe has been accompanied by wide ranging health care reform. The initial Soviet model has given way to a variety of forms of health insurance. Yet, as this paper argues, reform has too often been preoccupied with ideological imperatives, such as provider autonomy and the creation of funds separate from government, and has given much less thought to the contribution that health care can make to population health. The paper begins by examining the changing nature of health care. It recalls how the Soviet model was able to provide basic care to dispersed populations at low cost but notes how this is no longer sufficient in the face of an increasingly complex health care environment. This complexity reflects several factors, such as the growth in chronic disease, the emergence of new forms of infectious disease, and the introduction of new treatments requiring integrated delivery systems. It reviews evidence on how the former communist countries failed to keep up with developments in the west from the 1970s onwards, at a time when the complexity of health care was becoming apparent. It continues by setting out a framework for the organisation of health care based on the goal of health gain. This involves a series of activities that can be summarised as active purchasing, and which include assessment of health needs, designing effective packages of care, and monitoring outcomes.