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Nepal’s shift to federalism and the National Health Insurance Program (NHIP) aimed for universal health coverage, but persistent structural flaws undermine strategic purchasing and system efficiency. The Ministry of Health and Population’s conflicting roles as policymaker, purchaser, and provider, coupled with NHIP’s lack of evidence-based purchasing weaken accountability and resource allocation. To advance equity and federalism goals, Nepal must realign institutions, clarify mandates, and strengthen contractual mechanisms to embed strategic purchasing in its health financing architecture.