This analysis describes the development of technology for home self-infusion of factor VII in the treatment of hemophilia and its clinical, economic, and social consequences, and uses the case study of such home care treatment to illustrate the potentials and pitfalls of formal economic analyses of programs to treat chronically ill children. A comprehensive review of all original data on hemophilia programs, their related costs, and outcomes, conducted from 1966 through 1993, examined the economic outcomes for two hypothetical cohorts, one aged 0-4 years and the other aged 30-34 years. Including the measurement of treatment effects on the productivity of parental caregivers substantially increases the benefit-cost relationship of an intervention directed at chronically ill children. Increased economic productivity and societal return resulting from such a program for young adults exceeds those for a cohort of children, primarily due to assumptions related to discounting. However, estimation of quality-adjusted life years favors the younger age cohort, since children survive for a longer period of time and with each year survived comes a higher quality of life. Unlike simpler instances in which economic benefits can be shown to outweigh resource costs, policy decisions concerning services for chronically ill children raise an additional set of complex analytic issues. Inclusion of the benefits in productivity experienced by family caregivers provides an important added dimension to such analyses. The development of cost-benefit or cost-effectiveness analyses of these programs illustrates the importance of careful measurement of outcomes and explicit statements of underlying assumptions. Such an analysis of home care for children with hemophilia therefore demonstrates both the strengths and the limitations of this approach.