The various features of the HME are discussed in greater and more general detail elsewhere. A good article which is both recent and detailed is this 2014 piece from BioMed Research International.

The table below is used in the discussion of the college answer to Question 15 from the first paper of 2005, which asks "Compare and contrast the advantages and disadvantages of humidification of a ventilator circuit using a wet circuit versus a Heat and Moisture Exchanger."

Thus:

Comparison of Circuit Humidification and Heat/Moisture Exchangers
  HME Humidified circuit
Device description A hygroscopic in-line air filter A circuit which incororates an inline heated water chamber, with an integrated thermostat-controlled heating element
Cost Cheap Expensive - both the device and the attached consumables
Reusability Single-use Reusable humidified, disposable circuit
Workload Minimal Requires attention to water replacement and occasional troubleshooting
Humidification efficiency Low efficiency;
approximately 50% of the required humidity is achieved.
The devices are expected to produce a consistent level of humidity around 30mg/L; whereas 20mg/L is the more typical performance
Highly efficient. Humidity achieved ranged from 33mg/L to 44mg/L, which is near to the humidity achieved by the human respiratory tract.
Lifespan Should not be used for longer than 72-96 hrs Provided the circuit is well maintained and regularly changed, humidified ventilation can continue indefinitely
Risks with use Increases dead space;
Becomes progressively more waterlogged, increasing resistance to gas flow;
Potentially, can become a source of infection
 
"Rain-out": evaporated water collects in the circuit, pooling and attracting bacteria.The water bath itself is a nice warm environment which acts as a good incubator for bacteria
Contraindications to use Need to minimise dead space;
Large volumes of secretions
Decreased expiratory airflow
Large minute volume (>10L/min)
Bronchopleural fistula
Long term ventilation
Frequent nebulised medications
 
There are no contraindications to circuit humidification.
Evidence