Unbiased Analysis of Today's Healthcare Issues

Economics and QALYs

Written By: Jason Shafrin - Jun• 11•07

The New York Times (“…the Money Value of a Person’s Life“) has a non-technical article describing how economists value a year of life.  One standard methodology–the quality-adjusted life year (QALY)  is discussed.

“The idea of QALY is to put a value on treatments that may not save lives but improve them. For example, if a blind person’s quality of life is “worthâ€? 0.75 points per year, a treatment that would restore him to perfect vision — and raise his quality of life to 1 per year — is worth 0.25 per year of life. If the person lived another 30 years, the treatment would be worth 7.5 QALYs, or 30 times 0.25.”

A 1997 British Medical Journal article gives the results of a cost-benefit analysis for different procedures in terms of Cost/QALY.

  • Cholesterol testing and diet therapy: £220
  • Advice to stop smoking from patient’s own doctor: £270
  • Hip replacement for arthritis: £1,180
  • Kidney transplant: £4,710
  • Breast cancer screening: £5,780
  • Cholesterol testing and drug therapy if indicated (ages 25-39): £14,150
  • Neurosurgery for malignant brain tumours: £107,780

The NYT article also summarizes the standard gamble methodology.

People are asked to imagine having the symptoms of a certain disease — the pain, loss of function and shortened life expectancy. (Economists try to avoid using the specific name of the disease when they are describing it because some diseases, especially cancer, provoke disproportionately negative responses.)

Then the people are told that an operation exists that would cure them. But if the operation fails, the patient will die.

Under those circumstances, what odds of failure will the sick person tolerate? The higher the odds, the worse the disease. For example, a survey of people with severe diabetes, including blindness, found that they would accept the operation even if there were only a 42 percent chance they would survive, according to a registry compiled by Dr. Neumann’s program at Tufts.

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