Developing countries are turning increasingly to cost recovery to pay for health care services; but the decision makers who must develop and implement systems for cost recovery are often unfamiliar with health care financing issues. In recent years, economists have begun to develop computer models to help decision makers formulate policy in this field. The model discussed in this manual is a training tool that uses information about the demand and supply of health services to help make projections about the effects of health care financing reform on the utilization and the financial performance of the health system. It is intended to help teach the broad interrelationships of certain health policy variables and to assess their impact. In itself the model does not pretend to be complete enough to be used as a decision making tool. The model may be used to explore the implications of policies such as charging uniform user fees to all; charging differential fees based on income; implementing cross-price subsidization between curative and preventive services; exempting certain patients from payment; and establishing different levels of insurance premium and co-payment. It can also be used to assess the effects on utilization and performance of changes in a number of nonfinancial parameters such as the geographic distribution of the population relative to the providers; the distribution of income; the crude birth rate; population size; the incidence of acute illnesses; and the prevalence of chronic conditions. This user-friendly computer model is flexible enough to allow the user to enter data on demand and costs from various developing country settings and to simulate various changes in health care financing under a broad range of circumstances. It has been used as a training tool in several seminars organized by the World Bank ' s Economic Development Institute.