This article analyses the main characteristics of federalism in Brazil and its institutional relations with health policy. It discusses federalism from a classical perspective highlighting the essentially centralized nature of Brazil's system and the prevalence of decentralizing health policies underpinned by the principles enshrined by the 1988 Constitution.We used primary data obtained from an electronic questionnaire responded by secretaries of health sitting on the governing bodies of the country's health region and secondary data Ministry of Health databases covering the current health regions. The findings show that significant progress has been made in the implementation of regional governing bodies, yet without any significant impact on the reduction of deep regional inequalities in primary and hospital care. It concludes by suggesting that the persistence of inequalities is down to weak central coordination capacity and an inappropriate trade-off between a centralized federal system and competition between entities, thus undermining cooperative regionalization of the public health system as envisaged by the 1988 Constitution.