What's the Value of a QALY?

What's the Value of a QALY?

Timothy Taylor 09/06/2018 2

QALY is an abbreviation for "quality-adjusted life-year." It refers to gains in health, which combine a time dimension and an adjustment for quality of life. Peter J. Neumann and Joshua T. Cohen offer a quick overview in "QALYs in 2018—Advantages and Concerns," a "Viewpoint" article written for the Journal of the American Medical Association (May 24, 2018). Thus, even if you strongly dislike the idea of a QALY, you might want to be aware that your doctors and health care administrators are paying attention to them.

Here's an explanation from So how much is it worth to save a QALY? on the basic concept:

"A year in the hypothetical state of “perfect health” is worth 1 QALY. Being deceased is worth 0 QALYs. Other health states fall between these bounds, with less desirable states closer to 0. QALYs are useful because they combine mortality and morbidity into a single metric, reflect individual preferences, and can be used as a standard measure of health gains across diverse treatments and settings.

"Consider, for example, calculation of QALYs accrued by a hypothetical individual after age 70 years who develops cancer at age 74 years and who dies at age 76 years. If the health utility weight for a typical healthy individual in his or her 70s is 0.95 and the health utility weight while living with this particular cancer is 0.75, then after age 70 years, this individual accrues (4 years × 0.95) + (2 years × 0.75) = 5.3 QALYs. If screening leads to elimination of the cancer before symptom onset and extends the individual’s life from age 76 years to age 80 years, then with screening, the individual accrues 10 years × 0.95 = 9.5 QALYs."

Notice that a QALY is a more flexible tool than just talking about the value of a stastistical life saved (discussed here and here), because a QALY includes both a measure of how long life expectancy is extended and what the quality of life is during that time.

So how much is it worth to save a QALY? Neumann and Cohen summarize the current conventions in this way: 

"Typical value benchmarks in the United States have historically ranged from approximately $50 000 to, more recently, as high as approximately $150 000 per QALY. Those benchmarks purport to represent the “value” of a QALY; ie, the “willingness to pay” to gain 1 QALY of health. The benchmark could also be conceived as a measure of opportunity cost in terms of the health outcomes of the marginal intervention that must be relinquished to provide resources for a new intervention. Interventions with lower cost-effectiveness ratios below the benchmark are said to have favorable value because they “buy” QALYs relatively inexpensively; ie, at a cost below the value indicated by the benchmark. Interventions with higher ratios “buy” QALYs expensively and hence have unfavorable value. The United Kingdom’s National Institute for Health and Care Excellence, which is charged with assessing health technology value for that country’s National Health Service, has used more stringent benchmarks. With a number of exceptions, favorable value has generally corresponded to cost-effectiveness ratios below £20 000 (about $28 000) per QALY, and unfavorable value has generally corresponded to ratios exceeding £30 000 (about $42 000) per QALY."

For some additional detail on current estimates of the value of a QALY, a place to start is the work of the nonprofit Boston-based Institute for Clinical and Economic Review and its "Final Value Assessment Framework: Updates for 2017-2019" (2017).

"The primary measure by which the incremental cost-effectiveness of different care options will be compared will remain the cost per quality-adjusted life year (QALY). The QALY is the established benchmark for capturing benefits for patients through lengthening life and/or improving the quality of life, and it is the standard used by academics, manufacturers, patient groups, and governments around the world. ICER participates in the global dialogue around the best methods for evaluating the value of health services and is always attuned to new developments that might provide a better and fairer system of measuring benefits across different kinds of interventions and patients. ...

"The range of incremental cost-effectiveness ratios used by ICER for several years in its calculation of value-based price benchmarks has been $100,000 to $150,000 per QALY. Current benchmarks for cost-effectiveness thresholds are frequently justified by estimates of “societal willingness to pay,” which, based on earlier consensus efforts at the World Health Organization have commonly been cited as approximately 1-3 times the per capita GDP of the country per additional QALY. For the US this range is now approximately $57,000 to $171,000. Among others organizations, the American College of Cardiology has adopted a range of $50,000-$150,000 per QALY for its methods of incorporating value judgments in clinical guidelines.

"Studies of individual willingness to pay (by trading off salary for additional years of life) have widely varying results but many are in the range of two times the individual’s salary. Given the mean personal income in the US in 2015 was $44,510, this would suggest a threshold of approximately $90,000 per QALY. The third, and in many ways most relevant information to guide the setting of cost-effectiveness thresholds is information on the true opportunity cost at the margin of health spending. Recently, empiric studies have been performed in upper- and medium-income countries in Europe and Latin America that have found that to reflect true opportunity costs the costeffectiveness threshold should be set lower than 1 times the per capita national GDP (approximately $24,000-$40,000 per QALY by extrapolation for the US)."

It's easy to come up with objections that a QALY-based approach doesn't reflect either what people actually think or what people should think. Neumann and Cohen mention a number of these concerns, which I will number here just for clarity:

1) "For example, respondents [to surveys about QALY values]tend to favor interventions that help individuals most in need of care (eg, patients with cancer), regardless of whether these options are efficient from a QALY-optimizing standpoint."

2) "Moreover, there are concerns that cost-per-QALY ratios potentially discriminate on the basis of age and disability by favoring younger and healthier populations that have more potential QALYs to gain (although in many circumstances results from cost-per-QALY analyses favor older and disabled groups)."

3) "Another concern is that QALYs are not “patient-centric.” Some research supports this contention; QALYs may not reflect certain goals and priorities individuals have in treatment decisions, such as their effect on family circumstances (eg, desiring a therapy because it may increase the chance of attending an upcoming family wedding)." 

4) "Moreover, QALYs do not inherently distinguish between a long period spent in a moderately diminished health state and a shorter period spent in a more severe health state."

5) "Additional concerns about QALYs are directed at the idea of an authority, such as policy makers or economists, placing numbers on what people are “worth.” In addition, meaningful measurement of the utility weights that underlie QALY estimates poses challenges." 

6) "However, important conceptual issues will also remain. An example is the question of whose preferences should form the basis of the quality-of-life weights used to construct QALYs: those of patients or members of the general population."

This list of concerns could doubtless be extended. At a more primal level, noneconomists often just hate the idea of putting a monetary value on benefits of saving a life or improving health. Frankly, a lot of economists aren't very fond of the idea, either. But economists also recognize that one way or another, government, health care providers, and industry are going to look at a wide range of possible choices, whether for setting common standards or spending money. Choosing between those rules will will often often involve a comparison of costs and benefits, and thus whether one likes it not, the decisions involve placing a value on health benefits. QALYs can be tweaked and adjusted in different settings. But in the end, a QALY is just a way of pushing us to be explicit about our health care and public safety choices. 

A version of this article first appeared on Conversable Economist.

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  • Ilan Miguel

    Great read !!

  • Finn Johnson

    Excellent article


Timothy Taylor

Global Economy Guru

Timothy Taylor is an American economist. He is managing editor of the Journal of Economic Perspectives, a quarterly academic journal produced at Macalester College and published by the American Economic Association. Taylor received his Bachelor of Arts degree from Haverford College and a master's degree in economics from Stanford University. At Stanford, he was winner of the award for excellent teaching in a large class (more than 30 students) given by the Associated Students of Stanford University. At Minnesota, he was named a Distinguished Lecturer by the Department of Economics and voted Teacher of the Year by the master's degree students at the Hubert H. Humphrey Institute of Public Affairs. Taylor has been a guest speaker for groups of teachers of high school economics, visiting diplomats from eastern Europe, talk-radio shows, and community groups. From 1989 to 1997, Professor Taylor wrote an economics opinion column for the San Jose Mercury-News. He has published multiple lectures on economics through The Teaching Company. With Rudolph Penner and Isabel Sawhill, he is co-author of Updating America's Social Contract (2000), whose first chapter provided an early radical centrist perspective, "An Agenda for the Radical Middle". Taylor is also the author of The Instant Economist: Everything You Need to Know About How the Economy Works, published by the Penguin Group in 2012. The fourth edition of Taylor's Principles of Economics textbook was published by Textbook Media in 2017.


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