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QALY’s: Measuring the immeasurable (part 1)

Updated: Dec 15, 2022

There is a good chance when you ask this question you will be met with a scornful look and the assertion that a life is priceless, not only that, but there is something inherently immoral about expressing the value of one’s life as a number of pounds or dollars. The uncomfortable truth is that our health is always being valued, and this forms a crucial basis for many actions in health-policy today. The next question is value to whom? We all value our own lives and have a value to society and the state – and of course problems arise when these diverge.

One would expect that any imaginable utopia would provide access to any medicine and every treatment that would result in even an incremental increase in the quality or quantity of someone’s life. Sadly, however, we live in a world of resource constraints and whenever we have unlimited wants but constrained resources, we set the stage for economic analysis.

In a pure private health model, the patient derived utility from an intervention is represented by the price the patient is willing to pay. Health decisions are made according to one’s own preferences and subject to one’s budget constraint. The individual’s valuation of their own health is naturally not homogenous across society or even constant across time, but instead should be thought of as some ethereal intangible concept, about which our choices provide an implicit snapshot. Consider the question: how much would someone have to pay you for a 1% increase in the chance of death at work? Extrapolating the answer, together with some mathematical wrangling, gives us what economists call the VSL (Value of a Statistical Life), currently hovering around $8-10 million USD. Of course, they use more subtle markers to determine this value, for example by looking at the salary differentials for jobs with varying mortality rates. Although interesting, these discussions are somewhat academic compared to the valuation of health from a public health perspective.

In most modern societies’ healthcare has been collectivised, resources are pooled, and funding decisions are removed from the clinical setting. This poses a dilemma, how are limited resources to be spread across the unlimited needs of the nation? To answer this, we must first ask what the mandate for a public health system is, in the case of the NHS, the NHS Constitution states, “it is there to improve our health and wellbeing”. All those under the health system have the right to the same quality of care irrespective of gender, race, sexuality, or class – hence we can attribute the same weighting to people’s individual health when we assess population levels (in simple terms – all people are valued equally). When we maximise across a whole population we invoke a utilitarian approach, with the ultimate aim of providing the greatest net benefit possible given the resource constraints. The problems, and solutions, that arise from such a task can be brought to light through a rather crude and rudimentary example.

Consider a health care system with the five patients above. In our fictitious world the only available funding for healthcare is £850, not enough to provide the required care for all five patients (that would need £1,300). How then do we go about deciding which treatments to fund, keeping in mind our objective to maximise the overall net benefit? We quickly find ourselves at an end, with no framework to compare outcomes from different treatments, we are unable to identify the optimal choices. When we are comparing across such a broad range of outcomes, with no quantifiable comparators, it becomes impossible to make evidence-based decisions, and instead we rely on arbitrary impulses. We must find a way to compare apples and oranges. 

Due to this complexity a measure for “health and wellbeing” is widely used, called Quality of Life (QoL). This is a quantifiable metric that allows us to look at the net impact of an intervention, not only the direct effects, but also those secondary effects that affect your ability to live a fulfilled happy life. Of course, it is not just quality but also quantity of life we value, therefore we use the metric Quality Adjusted Life Years (QALY’s), which also takes into account any changes in life expectancy (I will further elaborate on these ideas later). This single quantifiable metric allows us to systematically analyse our above example by looking at each treatment’s net increase in QALY’s. Now we have a much clearer objective – to maximise the increase in QALY’s given our budget. A useful metric to use is £/QALY, which tells us for each treatment the funding required for a QALY gain of 1 – a low £/QALY signifies an efficient treatment with a comparatively high QALY gain for the associated cost.

We can now see from the example above that Patients B, C and D have the lowest £/QALY, and hence these treatments represent the maximum uplift in QALY’s and hence the greatest increase in health and wellbeing given the available budget of £850. The key step in allowing us to solve this funding puzzle was the transformation of many varied, often qualitative, health outcomes into a single metric and this practice plays an important role in health policy today. This approach obviously relies on the existence and identification of a true mapping between health outcomes and the vague notion of quality of life, and this question has borne a whole field of health economics dedicated to this aim. This practice is not unique to healthcare, development economists use proxy measures like HDI to represent the notion of a nations actual ‘development’ for the purposes of comparison and to inform decision making. Part 2 will look at how these QALY scores are generated and how they go on to inform many aspects of health policy. 

Published September 25, 2020

By Nick Batchelor

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