Health systems will face new challenges in this millennium. Striking the balance between the best quality of care and optimal use of dwindling resources will challenge health policy makers, managers and practitioners. Increasingly, improvements in the outcomes of interventions for both acute and chronic patients will depend on partnerships between health service providers, the individual and their family. Patient education that incorporates self-management and empowerment has proven to be cost-effective. It is essential that health care providers promote informed decision making, and facilitate actions designed to improve personal capacity to exert control over factors that determine health and improve health outcomes. It is for these reasons that promoting health literacy is a central strategy for improving self-management in health. The different types of health literacy--functional, interactive and critical health literacy--are considered. The potential to improve health literacy at each of these levels has been demonstrated in practice among diabetics and other chronic disease patients in Clalit Health Services (CHS) in Israel is used as an example to demonstrate possibilities. The application of all three types of health literacy is expressed in: (i) developing appropriate health information tools for the public to be applied in primary, secondary and tertiary care settings, and in online and media information accessibility and appropriateness using culturally relevant participatory methods; (ii) training of health professionals at all levels, including undergraduate and in-service training; and (iii) developing and applying appropriate assessment and monitoring tools which include public/patient participatory methods. Health care providers need to consider where their patients are getting information on disease and self-management, whether or not that information is reliable, and inform their patients of the best sources of information and its use. The improved collaboration with patient and consumer groups, whose goals are to promote rights and self-management capabilities and advocate for improved health services, can be very beneficial.