Abstract
In a recent paper Birch and Gafni criticised the use of cost-effectiveness ratios in decisions about the allocation of health care resources. To support their claim that the use of cost-effectiveness ratios will not lead to the maximization of health effects for a given budget they used an example. In this paper it is pointed out that the example used contains two basic errors. The first error is the failure to exclude dominated programmes in the estimation of incremental cost-effectiveness ratios. The second error is the failure to distinguish between independent and mutually exclusive programmes. It is concluded that to get a more sober discussion about the use and interpretation of cost-effectiveness analysis it is important that the technique is used correctly.