This article examines the meaning of federalism for health care financing (HCF) and is based on two considerations. First, federal institutions are embedded in their national context and interact with them. The design and performance of HCF policy will be influenced by contexts, the workings of the federal institutions, and the interactions of these institutions with different elements of the context. This article unravels these influences. Second, there is no unique model of federalism, and so we have to specify the particular form to which we refer. The examination of the influence of federalism and its context on HCF policy is facilitated by using a transnational comparative approach, and this article examines four mature federations: the United States, Australia, Canada, and Germany. The relatively poor performance of the U.S. HCF system seems associated with the fact that it operates in a context markedly less benign than those of the other national HCF systems. Heterogeneity of context appears also to have contributed to important differences between the United States and the other countries in the design of HCF policies. An analysis of how federalism works in practice suggests that, while U.S. federalism may be overall less favorable to the development of well-functioning HCF policies, the inferior performance of these policies is to be principally attributed to context.

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