Decentralization of health services in Chile (dating from the 1970s) caused initial job insecurity and displacement. Because municipalities were reimbursed for each unit of service delivered they tended to provide too much high-cost curative care and too few preventive services, which caused costs to explode. The government then moved to cap allocations to local authorities, using as a basis historical budget shares that favoured the wealthier municipalities. The democratically elected government that came to power in 1989 has chosen to maintain the broad thrust of the health reforms while seeking ways to overcome their adverse effects. These include: municipal elections, training programmes for municipal health officiers, management contracts for decentralized hospitals, and central allocation of funds on a capitation basis with provision for further adjustment to favour the poorest localities.