Economic evaluation of health services may take many forms, depending on the range of costs and consequences included in the analysis and the methods employed to measure and value them. In order to clarify the sometimes confusing array of economic analyses for users and evaluations, an analytic overview of costs and consequences to be considered for inclusion in such evaluations is presented. This allows the techniques of cost-effectiveness, cost-benefit, and cost utility analysis to be differentiated. Two often neglected methodologic issues are also discussed. First, it is suggested that the significance of the analytic viewpoint for economic evaluations should not be underestimated. Second, it is recognized that economic evaluations that demonstrate cost savings from a program or policy change implicitly assume that resources can be removed from the health sector. In fact, this is seldom true, consequently strategies for incorporating this knowledge into evaluations are discussed.