Studies assessing the clinical and economic benefits of vaccination in the elderly have used different clinical outcomes (e.g. hospitalizations for pneumonia or influenza versus hospitalizations for respiratory and cardiovascular causes) and different outcome periods (e.g. peak versus total influenza season) on which to base estimates of clinical effectiveness and cost effectiveness. We explored the implications of these varying approaches by comparing two health economic analysis models of influenza vaccination of community-dwelling elderly persons. We developed computerized models using clinical data from 3 large US HMOs for the 1998-1999 and 1999-2000 influenza seasons. The primary health economic model used a broad definition of clinical events and outcome period and included hospitalizations for all respiratory and cardiovascular events that occurred during the entire influenza season. The alternative model used more restrictive definitions and included pneumonia or influenza hospitalizations occurring during the peak influenza season. The results of Monte Carlo simulation showed that, with the more inclusive primary model, influenza vaccination resulted in net medical care cost savings due to fewer respiratory or cardiovascular hospitalizations of Dollars 71/person vaccinated (5th-95th percentile Dollars 32-118) and net savings of Dollars 809/year of life saved (5th-95th percentile Dollars 331-1450). In contrast, the alternate model found costs of Dollars 3.50/person vaccinated (5th-95th percentile Dollars -11 to 5) and net costs of Dollars 91/year of life saved (5th-95th percentile Dollars -309 to 126). Our findings confirm that influenza vaccination of the elderly is most likely cost saving and supports policies and programs that advocate routine immunization of all persons 65 and older. They also highlight how different outcome definitions can influence the results of health economic analyses.