Exemptions from user charges have proven to be very hard to implement in those countries thatrnhave adopted them. Poor screening mechanisms have been the main reason for the difficulty ofrnidentifying those patients who are able to pay for granting free care services from those that don'trnhave the ability.rnThis is a result of a cross sectional descriptive study that compared the characteristics of freernpatients with those paying at the analysis stage in the northern part of Ethiopia. In addition, it hasrnassessed the presence and extent of under coverage and leakage in the provision of free healthrnservices. The study utilized a multistage sampling method for the household survey and systematicrnrandom sampling for exit interview. In addition, kebele free treatment letter writers, and healthrninstitution administrators were purposively selected to fulfil the study objectives.rnAccording to the results of the study, provision of free health care represented for more than halfrn(52.4%) of government health expenditure in the area. Even though the problem of under coveragernand leakage was not very high, there was no statistical significant association between low incomernand getting free care in rural public health institutions. Proper registration of free treatment provisionrnseemed to be the most important mechanism for the system to function efficiently. Even thoughrnmost health institutions have registration books for recording free treatment, they were not properlyrnusing them.rnAs Ethiopia is one of the countries that attempts to ensure access to health care by the poor, thernresults of this study wi ll help to have better understanding of the issues regarding the properrnimplementation of waiver and exemption mechanisms.