Health systems in the European Union perform a vital social security function. They mitigate both health and financial risks and make a major contribution to social and economic welfare. In light of various cost pressures, the Council of the European Union has articulated the challenge facing the member states as the need to secure the financial sustainability of their health systems without undermining the values these share: universal coverage, solidarity in financing, equity of access and the provision of high quality health care (Council of the European Union 2006). Our aim in this report is to contribute to addressing this challenge by examining how strengthening the design of health care financing can help to secure health system sustainability. The report begins by clarifying the nature of the sustainability problem (Section 1). It then explores the adequacy of current financing arrangements and recent financing reforms in respect of their ability to secure sustainability (Sections 2 and 3). Finally, it offers some practical suggestions as to the best way forward.