As healthcare costs rise in the United States, debate is ongoing over how to obtain better value for dollars spent. In this context, the use of cost-effectiveness analysis (CEA) is more compelling than ever. This work, written by the Second Panel on Cost-Effectiveness in Health and Medicine, reviews key concepts and analytic challenges in CEA. The authors endorse the original panel's concept of a reference case and support its recommendation that analysts take a broad societal perspective; in addition, they recommend a healthcare sector perspective for a second reference case, as well as an important new framework, the Impact Inventory, for detailing costs and effects.