The goals of a health system should be to provide all necessary care to everybody, improve the mean level of quality of care, reduce variations in this care, and eliminate waste. In fact, the driving force currently promoting change in the health system is cost containment, and the greatest efforts being exerted in this regard are in those areas where the most money is being spent. Research suggests that increased health spending does not necessarily equate with improved healthcare. Furthermore, reducing expenditure does not ensure that only less than necessary procedures are eliminated. Thus, it is important to use a conceptual model that relates cost to quality of care when approaching the problem of reducing the costs of healthcare. It is also necessary to define quality of care and necessary care, so that the clinical process can be re-engineered to ensure that both quality and necessary care can be delivered. The financial incentives that support the implementation of this process can then be put in place. Quality of care at an acceptable cost can only be obtained if waste is identified and eliminated, resources are applied to necessary and appropriate care, variations in the quality of care are eliminated, and economic policies consistent with a country's culture and expectations of value for money are adopted. Accomplishing these objectives will be difficult and costly. However, the effort must be made, if for no other reason than that the existing system in the United States, whereby health insurance is not provided for everyone, is unacceptable.