OBJECTIVES: To review and assess the current practices of financing health care in Nepal, and draw possible alternative strategies for the payment along with delivery of efficient and equitable health care.  METHODS: Literatures review on the financing mechanisms and their compatibility to deliver efficient health care, globally, and current practices in Nepal.  RESULTS: Nepal’s total expenditure on health (TEH) is still below 10 % of the gross domestic product, albeit marked improvements in health outcomes in the last 10 years. About 62% and 17% of the total population meet their health expenses by out of pocket (OOP) payment and government funded social health insurance (covering civil servants and maternal health services), respectively; remaining are supported donor funding. Whilst, 0.4% of private expenditure on health is supported by prepayment (private) plans, a huge population remain uncovered with any protective plans.  CONCLUSIONS: As no country has a single mechanism to finance health care, the challenge of choosing unsurpassed payment module is almost imputable. With large proportion of TEH dominated by OOP payment, it has huge implications in efficiency and equity of health care services at different levels. As improvements in national economy and large urbanization might be a long term plan, increasing reliability and dependability on tax financing can be an immediate measure to reduce dependence on OOP payment. Scrutinizing the community health insurance programs and their promotion, along with close monitoring of successful social health insurance in developed countries may be judicious to strengthen equitable health care. Weakening governance, fragile political leadership and paucity in honesty among the stakeholders has propelled social health insurance far beyond the reach for the Nepalese population. Moreover, there is an utmost need to restructure available resources from high- cost, low-impact interventions to low-cost, high-impact essential health care services, while improving effectiveness and efficiency.