The 'sun-rise' industry of private health care, especially private hospitals, in Thailand throws many questions to the health policy forum. Will the growth of the private health sector reduce public health expenditure, or will it increase total expenditure on health? The focus of this study is on equity in health and health care: in a country where private expenditure dominates total health expenditure and the government lets the private health sector flourish, in this scenario, are the poor or the underprivileged the victims of this limited privatisation policy? The main research objective was to assess the equity of coverage of public and private health in an urban area in order to identify policies of promotion and regulation which would lead to an equitable and efficient health service system. The study used Phitsanulok municipal area as a model to develop policy recommendations for other urban areas. There were three main methods of data collection: general household survey, health diary plus household health interview and a one-day bed census of patients in public and private hospitals in the municipality. The first two methods employed multi-stage random sampling with clusters of 12 and 3 households, respectively, as smallest sampling units and these neighbourhood households were divided into three groups to represent each season in a year. The main findings were that inequalities in health existed among different household income, education and occupational groups, including these attributes of the education and occupational groups adjusted according to the household head. Unequal accessibility to health care seemed to affect both reported rates of illness within the past two weeks and hospitalisation during the past 12 months. Inequity of health care financing was obvious in that the underprivileged (the poor, the uninsured and underinsured) paid out of pocket as a percentage of their household income higher sums than the privileged groups. The private health sector (private clinics and private hospitals) was the major provider of health care to urban dwellers for both outpatient and inpatient services. Users of public facilities were the lower income groups and civil servants, while users of the private health sector were the higher income groups, the higher occupational groups and the younger age groups. Inpatients of private hospitals were more likely to be covered by health benefit schemes (civil servant benefit, private insurance, etc.) than inpatients of public hospitals. Information on the utilisation and financing pattern of private health services reconfirmed inequity of health care financing. It is obvious that the Thai health care system needs changes to reduce inequity in health and health care. Universal coverage is a way towards more equitable health care financing. While Thai citizens (in urban areas) have enjoyed a wide choice of health utilisation, a public competition model could be applied to the public health sector to make public services more competitive and more efficient.