This paper examines the objectives of a funding policy for rehabilitation services. A casemix funding system comprises two sets of instruments: a classification system and a payment system. Attention is given to identifying which policy objectives are best pursued through each of these instruments. The paper then analyses the effect of various instruments on creating incentives for efficiency and quality, and assesses policy options with regard to their capacity for dealing with the heterogeneity of rehabilitation patients and controlling various forms of gaming. In conclusion, the paper canvasses four major areas warranting consideration in advancing policy: the use of a blended payment system; dealing with functional gain; the development of an information base; and the focus on designated rehabilitation units.