This study investigates the determinants of regional variations in health care expenditures (HCE) in Switzerland, since there are significant differences between cantons per capita HCE. The empirical analysis contributes to the discussion on the outcome of federalism in the Swiss health care system by improving the understanding of the determinants of the differences in HCE. Our econometric estimations indicate that HCE are significantly related to the density of specialist physicians, density of dispensing doctors, per capita income, proportion of managed care, medical and technological progress and socio-economic factors. Due to the presumptive importance of the organisation of ambulatory care, we suggest policy makers should particularly concentrate on promoting the supply of managed care models in Switzerland. Supporting the development of managed care may help to countervail some of the influences which tend to lead to higher cantonal health expenditures.