Because of the increasing health care costs and the need for proper allocation of resources, it is important to ensure the best use of health benefits for sick and injured people of the population. An index or indicator is needed to help us quantify what is being spent so that comparisons with other options can be implemented. Cost-effective analysis seems to be well suited to provide this essential information to health care policy makers and those charged with distributing disability funds so that the proper allocation of resources can be achieved. There is currently no such index to show whether the benefits paid out are the most cost-effective. By comparing the quality-adjusted life year (QALY) of a treatment method to the disability an individual would experience, on the basis of lost wages as measure of disability, we provide decision makers more information for the basis of cost allocation in health care. To accomplish this, we describe a new term, the PPD-QALY (permanent partial disability-quality of life year). This term was developed to establish an index to which musculoskeletal care can be compared, to evaluate the cost-effectiveness of a treatment on the basis of the monetary value of the disability. This term serves to standardize the monetary value of an injury. Cost-effective analysis in arthroscopic surgery may prove to be a valuable asset in this role and to provide decision makers the information needed to determine the societal benefit from new arthroscopic procedures as they are developed and implemented.