Getting "Call using iphone failed" on incoming calls
I noticed that I only had the problem when my iPhone was near my MacBook pro. It turned out that the problem had to do with the Handoff featured introduced in iOS 8 and OS X Yosemite.

When I turned off Handoff and Facetime integration on my iphone, the problem went away. Here are a couple of threads with more details on how to deal with this:

https://discussions.apple.com/thread/6538204?start=0&amp;tstart=0 (final post in thread)

And here's a possible fix that I haven't tried:

http://www.imore.com/continuity-fix