The objective of this study was to evaluate the potential clinical and economic implications of an annual lung cancer screening programme based on helical computed tomography (CT). A decision analysis model was created using combined data from the Surveillance, Epidemiology and End Results (SEER) registry public-use database and published results from the Early Lung Cancer Action Project (ELCAP). We found that under optimal conditions in a high risk cohort of patients between 60 and 74 years of age, annual lung cancer screening over a period of 5 years appears to be cost effective at approximately $19000 per life year saved. A sensitivity analysis of the model to account for a 1-year decrease in survival benefit and changes in assumptions for incidence rate and costs generated cost effectiveness estimates ranging from approximately $10800 to $62000 per life year saved. Based on the assumptions embedded in this model, annual screening of high risk elderly patients for lung cancer may be cost effective under optimal conditions, but longer term data are needed to confirm if this will be borne out in practice.