While the health sector has attracted significant foreign aid, evidence on the effectiveness of this support is mixed. By combining household panel data with a unique geographically-referenced foreign aid data, this paper uses a Difference-In-Differences approach to investigate the contribution of aid on key health outcomes in Uganda. We find that even though aid was not targeted to localities with the worst health conditions, health aid achieved an overall significant impact in reducing both disease severity and burden. However, the impact is most robust for disease burden compared to severity. In addition, we observe increased aid effectiveness if resources are channeled to locations that are closer to communities in need, given ease of access to health services. From a policy perspective, the results point to the need for development partners to better target aid to sub-national areas with higher disease prevalence. Moreover, aid ought to be channeled as close to intended beneficiaries as possible, thus offering additional advantage of driving the Universal Health Coverage strategy of “close to client” health system.