A controversial part of NICE's work is its appraisal of whether particular treatments are cost effective, that is whether they produce sufficient benefits to be worth their cost to the NHS. Benefits include improved quality of life for patients, including relief of pain and disability, as well as increased length of life. Quality and length of life are often measured together in QALYs, which are discussed in Unit 5 of this e-source.

If a treatment is cost effective in NICE's view for a group of patients, the NICE wil recommend its use throughout the NHS in England and Wales (the Health Technology Board of Scotland performs a similar function to NICE but for Scotland; Northern Ireland does not have an equivalent body). If NICE deems a treatment to be not cost efective, it will recommend against its use in the NHS. This is what makes NICE controversial

The government hopes that this increases the total health care benefits gained from the money the NHS spends. The government also hopes that NICE's work will gradually bring an end to what is referred to in the press as 'postcode prescribing'. This is where some treatments, especially prescribed medicines, are available from the NHS if you live in certain parts of the country but not if you live in others. The problem arises because the NHS funds are inevitably limited, so that not all services can be provided that might be demanded by consumers (who under the NHS do not have to pay for them when they use them). This means that the NHS has to limit, or 'ration', the range and volume of services it makes available. NHS purchasers in different parts of the country currently choose to buy slightly different mixes of health care for their local populations. Hence 'postcode prescribing'.

NICE represents an explicit attempt to introduce economic considerations into the allocation of NHS resources, in addition to medical judgements. It remains to be seen whether NICE achieves what the government expects of it.