OBJECTIVES: To evaluate the cost effectiveness of long-term therapy with high flow humidified air supplemented with oxygen as required at 37°C delivered through nasal cannulae (long term humidification therapy; LTHT) for patients with moderate or severe COPD or bronchiectasis. METHODS: The source was a 12-month clinical trial showing that LTHT at a mean duration of 1.6 hours per day reduced exacerbation days and improved quality of life assessed by the St. George’s Respiratory Questionnaire compared to usual care alone. Resources included the LTHT intervention equipment and consumables, relevant hospital admissions, general practitioner consultations, Emergency Care presentations and pharmaceuticals. Details of consultations and medication usage were obtained from patient diaries and hospital admissions from retrospective administrative records. Utility values were obtained indirectly from the St Georges Respiratory Questionnaire using a published algorithm. The ICUR was estimated over the lifetime of the device (5 years) using the bootstrap method with 5000 replications. Future costs and benefits were discounted at 3.5% per annum. RESULTS: The incremental health state utility over 12 months was estimated at +0.084 (95% CI 0.003-0.165).  Annual costs excluding the intervention were NZ$2329 (95%CI $1249, $3409) for the treatment group and NZ$3477 ($712, $6241) for the control group (nsd). With the LTHT intervention costed at $10,461 over the lifetime of the device (5 years) the cost per QALY was NZ$15,615 (95%CI $15,521, $15,709). At a willingness to pay (WTP) threshold of NZ$30,000, the probability of LTHT being cost effective was 89% and at a WTP threshold of $20,000 it was 71%, ranging from 64% to 77% as the 5-year cost of LTHT equipment and running costs was varied by ±20%. CONCLUSIONS: Long term humidification therapy for moderate to severe COPD or bronchiectasis is as cost effective as most new pharmaceuticals that are reimbursed by the New Zealand government.