In all western countries health care budgets are under considerable constraint and therefore a reflection process has started on how to gain the most health benefit for the population within limited resource boundaries. The field of “ethics of resource allocation” has evolved only recently in order to bring some objectivity and rationality in the discussion. In this article it is argued that priority setting is the prerequisite of ethical resource allocation and that for purposes of operationalization, instruments such as “need assessment” and “health technology assessment (HTA)” are essential worktools for making more rational decisions. Thresholds (deduced from the need assessment and HTA) are—within this context—guiding but not binding principles. Method: Discussion of theoretical concepts of not only priority setting, need assessment and HTA complemented by practical examples for showing the challenges and the need, but also the chances of a more explicit and transparent policy of resource allocation in health care. Results: Priority setting in health care is based on the values of equity, justice and solidarity. Health packages decisions are determined from medical need (the severity of the condition) and/or the appropriateness of medical interventions (their cost-effectiveness). With growing awareness that originally effective and cost-effective services and programmes are eventually provided inappropriately, the focus is shifting towards the organisational aspects of provision and application. Therefore, need assessment is based on the distinction of health care needs from demand, supply, or actual care. Additionally HTA provides the evidence on health care interventions in a way that it becomes obvious who benefits from an intervention and who definitely does not benefit, but eventually is harmed. Conclusions: Health services research on effective and cost-effective interventions and research/monitoring of performance that the effective and cost-effective services are provided appropriately are of increasing importance for guiding the decision-making process on priority setting and need assessment. Effective healthcare for all is sustainable, if we start to put expenditures in perspective and focus health policies and research strategies on managing expectations through patient information and a more realistic notion of medical advancements and, on the other hand, on encouraging need-based and cost-effective innovations.