Background We evaluated whether diagnostic thyroidectomy for indeterminate thyroid nodules would be more cost-effective than genetic testing after including the costs of long-term surveillance. Methods We used a Markov decision model to estimate the cost-effectiveness of thyroid lobectomy versus genetic testing (Afirma®) for evaluation of indeterminate (Bethesda 3–4) thyroid nodules. The base case was a 40-year-old woman with a 1-cm indeterminate nodule. Probabilities and estimates of utilities were obtained from the literature. Cost estimates were based on Medicare reimbursements with a 3% discount rate for costs and quality-adjusted life-years. Results During a 5-year period after the diagnosis of indeterminate thyroid nodules, lobectomy was less costly and more effective than Afirma®(lobectomy: $6,100; 4.50 quality-adjusted life-years vs Afirma®: $9,400; 4.47 quality-adjusted life-years). Only in 253 of 10,000 simulations (2.5%) did Afirma® show a net benefit at a cost-effectiveness threshold of $100,000 per quality-adjusted life-years. There was only a 0.3% probability of Afirma® being cost saving and a 14.9% probability of improving quality-adjusted life-years. Conclusions Our base case estimate suggests that diagnostic lobectomy dominates genetic testing as a strategy for ruling out malignancy of indeterminate thyroid nodules. These results, however, were highly sensitive to estimates of utilities after lobectomy and living under surveillance after Afirma®.