This paper examines the cost-effectiveness of end stage renal disease (ESRD) treatments. Empirical data on costs of treatment modalities and quality of life of patients were gathered alongside a clinical trial and combined with data on patient and technique survival from the Dutch Renal Replacement Registry. A Markov-chain model, based on the actual Dutch ESRD program as of January 1st 1997, predicted the cost-effectiveness and cost-utility of dialysis and transplantation over the 5-year period 1997-2001. Total annual costs amounted to DFL 650 million (1.1% of the health care budget). Centre Haemodialysis was found to be the least cost-effective treatment, while transplantation and Continuous Ambulatory Peritoneal Dialysis (CAPD) were the most cost-effective treatments. The Markov-chain model was used to study the influence of substitutive policies on the overall cost-effectiveness of the ESRD treatment program. The influence of such policies was found to be modest in the Dutch context, where a high percentage of patients is already being treated with more cost-effective treatment modalities. In countries where Centre Haemodialysis is still the only or the major treatment option for ESRD patients, substitutive policies might have a more substantial impact on cost-effectiveness of ESRD treatment.