Without clinical guideline on the optimal timing for primary total hip replacement (THR), patients often receive the operation with delay. Delaying THR may negatively affect long-term health-related quality of life, but its economic effects are unclear. We evaluated the costs and health benefits of timely primary THR for functionally independent adult patients with end-stage osteoarthritis (OA) compared to non-surgical therapy followed by THR after progression to functional dependence (delayed THR), and non-surgical therapy alone (Medical Therapy), from a German Social Health Insurance (SHI) perspective. Data from hip arthroplasty registers and a systematic review of the published literature were used to populate a tunnel-state modified Markov lifetime model of OA treatment in Germany. A 5% annual discount rate was applied to costs (2013 prices) and health outcomes (Quality Adjusted Life Years, QALY). The expected future average cost of timely THR, delayed THR and medical therapy in women at age 55 were €27,474, €27,083 and €28,263, and QALYs were 20.7, 16.7, and 10.3, respectively. QALY differences were entirely due to health-related quality of life differences. The discounted cost per QALY gained by timely over delayed (median delay of 11 years) THR was €1270 and €1338 in women treated at age 55 and age 65, respectively, and slightly higher than this for men. Timely THR is cost-effective, generating large quality of life benefits for patients at low additional cost to the SHI. With declining healthcare budgets, research is needed to identify the characteristics of those able to benefit the most from timely THR.