Health economics literature provides ample evidence for existing inefficiencies in health. Economic appraisal seeks to improve efficiency by guiding policy makers in how scarce resources can be used to derive the greatest possible social benefit. In the past many cost-effectiveness (CE) studies have addressed sector-wide cost-effectiveness in health. However, as described in this paper, current studies suffer from a number of shortcomings including the inability to assess the current mix of interventions, low generalisability and inconsistent methodological approaches. Most importantly, it is argued that the current incremental approach to cost-effectiveness analysis (CEA) does not provide decision makers with sufficient guidance for sector-wide priority setting in health. Instead, a broader complementary sectorial approach is proposed via the application of a generalised CEA framework, which allows the examination of existing inefficiencies in health systems. The wide variations in cost-effectiveness ratios observed among interventions that are currently in use, suggest there is considerable room to improve efficiency by moving from inefficient interventions to efficient interventions that are underutilized. This information will contribute to a more informed debate on resource allocation in the long-term.