QALYs and Policy Evaluation: A New Perspective

Abstract

The "quality-adjusted life year" (QALY) is a metric for health and longevity that is now widely used by health economists, public health scholars, and others researching the economics of health care. QALYs work like this: Imagine a life history or "profile" of health states h1, h2 ... hn, where each state hj persists for tj years. A health state can be death, perfect health, or any disease condition inbetween: angina, bronchitis, lung cancer, depression, headaches, heart disease, and so on. Patients who have experienced the states, physicians familiar with the states, or members of the general population will have been surveyed and asked to rank each state hj on a 0-1 scale of health quality, with 1 representing perfect health and 0 representing death. There are various techniques for eliciting the quality ranking, q(hj), the two most popular being the "time-tradeoff' method and the "standard-gamble" method. The first method seeks to determine the respondent's point of indifference between living y years with the condition hj, and x years in perfect health (with x less than y), and assigns hj the number x/y. The second method seeks to determine the respondent's point of indifference between living a given period of time with the condition, and a gamble with probability p of living in perfect health for that same period of time and probability 1-p of dying instantaneously. Health state hj is then assigned the indifference probability, p, as its quality ranking.