Nepal faces the challenge of high levels of poverty, difficult access to health facilities and poor, though improving, health indicators. In response, in the past 5 years it has been experimenting with a range of approaches to removing user fees. Access to health care is now enshrined as a constitutional right for all. This article examines the latest policy, which was introduced in January 2009: free delivery care across the country.

The study objective was to understand the effects of the policy on health facilities. Study methods included structured forms to retrieve financial and activity data from national, district and facility records (comparing 10 months before implementation with 10 months after). These were supplemented by semi-structured interviews with key informants at different levels of the health system.

Findings include that utilization of services (at the facilities visited) continues to rise, with caesareans proportionate to the general growth in deliveries. Funds for the free delivery policy (‘Aama’) are found to be adequate to cover the main costs of services, with some surplus which can be invested in staff and in improving services. The system for reimbursing facilities is operating without undue delay and there is satisfaction with the flexibility of use of resources which it allows and the additional incentives for staff. The main concerns relate to wider systemic issues—in particular, understaffing in some key posts and areas, and dwindling general revenues for the facilities, especially through loss of wider user fee revenues. This may explain the ongoing charges for patients, which both facilities and patients report. It will be challenging to build on the gains of the past few years and sustain them, at the same time as merging the separate free care funding streams.