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In the first decade after the transition to democracy, Brazil shifted from a highly centralized contributory health system that served only formal sector workers to a decentralized universal system in which subnational governments bore nearly full responsibility for the provision of health services. This paper explores the changes that decentralization has created in the distributive nature of Brazil's health system. I use comparative historical analysis to trace the development of Brazilian health policy along these four dimensions (decentralization, ideological commitment, and fiscal and administrative capacity) and explore their impact on the distributive nature of the health system in two subnational cases Bahia and Sã o Paulo. For health policies to be equity-enhancing--favoring the poor and traditionally disadvantaged societal groups--several conditions are necessary. An ideological commitment to equity must exist on the part of those responsible for health policy and the fiscal and administrative capacity to develop and execute equitable policies is also necessary. The depth and type of decentralization set the bounds of what is possible and commitment and capacity are determining factors for health policy and outcomes. Over the course of the democratic period, national commitment and capacity have increased. For Brazil, enhancing equity in health will require increasing the capacity of subnational governments and ensuring that political actors at all levels are committed to the national health system (SUS). [ABSTRACT FROM AUTHOR]