Household ability to pay (ATP) for health care services has become a critical policy issue in developing countries because of changes to health system financing and delivery that are likely to impose higher illness cost burdens on poor households. The research presented in this thesis was driven by widespread concern about ATP among different policy actors, and by the fact that conceptual and empirical understanding of the issue remains poorly developed. The thesis uses a conceptual framework for assessing ATP that is, at its core, concerned with the implications that illness costs and related coping strategies have for household livelihoods. The main research objectives were to measure the household costs of illness, examine the types of asset (e. g. financial, social) that are mobilised to cover illness costs, and to evaluate the impact of these illness cost burdens and coping strategies on household livelihoods in the medium term. In so doing, the thesis aimed to identify factors which make households robust or vulnerable to illness costs which development agencies might support. Research was conducted in two low-income communities in Colombo, Sri Lanka. A survey of 423 households was carried out to obtain a profile of illness, treatment actions and illness costs in the two communities, and to identify case study households. The main part, of the research was to follow 16 case study households for eight months, which enabled in-depth investigation of treatment seeking behaviour, expenditure patterns, asset strategies and their impact on household livelihoods. The main findings of the research were ' that free public provision of health services protected poor households from high treatment -costs. In particular, public tertiary hospitals protected households against potentially catastrophic treatment costs associated with inpatient care. This enabled households to access treatment without adopting risky coping strategies. However, aspects of the health system failed to protect households from illness costs, and in a context of low and insecure incomes, illness costs did not have to be high to exceed daily budgets and undermine ability to meet basic food needs. Consequently, households often required additional resources to meet illness costs, and people's financial and social resources were shown to be important factors influencing ability to manage illness costs. However, the research also found that income-poor households had weak social resource endowments which forced them into riskier borrowing or asset strategies. Policy actions to support household assets are examined.