Although total joint replacement (TJR) is a major advance in the treatment of patients with osteoarthritis, its cost-effectiveness has been questioned. We report the results of a study of the costs and benefits of TJR in consecutive osteoarthritis patients, 6 months after the surgery. Health status was measured by the Index of Well-Being. Costs of services for arthritis were determined by interview and billing records. Six months after TJR, significant improvements were seen in global health and in functional status. The average cost of care for the 6 months prior to TJR was $933. The average cost during the 6 months beginning with the TJR was $22,730 per patient--due almost entirely to costs of surgery. In general, the surgery did not change work status, probably because the mean age of the patients was 66.4 years. There were large effectiveness/cost differentials (the larger the effectiveness/cost differential, the higher the degree of cost-effectiveness [CE]). At 6 months, for all patients, the CE was associated with initial health status. The highest CE was observed in 10 patients who initially had the poorest health. TJR is more cost-effective for patients with the most to gain and less effective for those with better preoperative health status.