How economists think about valuing life when allocating resources for healthcare purposes.

A couple of comments to an earlier column asked questions about the quality of life versus the prolongation of life. It might be useful to set out an economic perspective on the broad issue, while acknowledging the economists do not have the last word. However, as a very brief account of my long-standing involvement with the topic shows, economists cannot avoid the issue because of its resource implications.

When I was young I thought the function of medicine was to save lives. With a little bit of maturity I realised that since we all die once, medicine was only prolonging life. However different treatments uses resources which may prolong lives to different extents. How are we to allocate the available resources?

A health economist hits this problem in all sorts of ways but here is an interesting example. It is well known that more deaths are attributable to the use of tobacco than to the misuse of alcohol. But tobacco deaths occur much later in life than many of the alcohol deaths. While a smoker dying at 70 may lose 15 years of life, a drinking teenager may lose 60 years in a crash. Allow for that and the total years of life terminated by alcohol misuse are much closer to the life-years terminated by tobacco use. A death count is misleading.

But even the notion of life-years is not refined enough. About 15 years ago I was working on whether a particular (costly) drug should be provided by the public health system to those with multiple sclerosis. As far as could be ascertained, it did not prolong the sufferer’s life. But it could make a huge difference to its quality, by delaying the onset of the more advanced stages of the disease and moderating its impact. A life-year only evaluation would give the nonsensical answer to never use the drug since there were no gains in life-years from using it. Yet there were people purchasing the drug for themselves; they were certainly not behaving nonsensically.

Fortunately economists had been developing a relevant measure called a QALY – quality of life adjusted year. Its value is unity for a person with good health, zero for those who are dead and a number between reflecting where there the quality of life was less than good but not as bad as death. Measuring the exact proportion for each condition is not easy, but there has been a huge effort to develop good measures.

That incorporates the prolongation of life into the quality of life, giving greater weight to years of better health. The economic analysis would value, say, a treatment which gave three years of 0.8 QALYs (a total of 2.4 QALYs) over the alternative of five years of 0.3 QALYs. (!.5 QALYs) Note that while the economic analysis may be saying that it is rational (in resource terms) to provide the treatment, it is for the patient to choose whether to take on a treatment which gives them a shorter life, but of better quality. (Others may be involved in making the decision – this is not something on which economics is well-placed to have an opinion.)

The adoption of QALYs might lead economists into further questioning the relevance of GDP (or income) in making judgements about a person’s (or group of persons’) wellbeing. I have fiddled around on the edges of this (as have some of the profession’s virtuoso violinists). Basically, QALYs work best for physical health status. (I am not sure they even work well for mental health status.) They are not designed to measure overall wellbeing or happiness. You can combine QALYs with income but the outcome is odd. But that is another story. And probably one we shall see steadily progressing.

Comments (4)

by barry on November 28, 2014

So what would be the rational decision if QALYs could be negative?

by Moz on November 28, 2014

Barry, of course QALY's can be negative, anything else would be nonsensical. Take a healthy person, give them chemotherapy drugs... BAM, negative QALY's. Best to dress that up with some sort of testing, maybe prostate specific antigens or breast lumps, then the drugs. Which is not, by the way, a made up example.

by Moz on November 28, 2014

There are also medical practices that produce zero QALY improvement in the patient, but significant improvements in people around the patient (as long as you allow QALYs to measure mental health). For example, the "girlfriend in a coma" scenario works this way. Doesn't matter how long you are in a coma for, your QALY's appreciate at a rate of.... zero. But for people around you, they might feel bad (lower QALY accumulation) if you're put down, or better if someone plausibly tells them you might get better. And you might, some coma patients wake up with only minor brain damage and eventually learn to dress themselves again. Others, don't.

People who insist that QALYs only measure mental health should, IMO, be strongly encouraged to spend some of their "perfect QALYs" in an Australian holiday camp on Nauru or Manus Island while they convince Australia's Miniter for Immigration that they deserve to be released. Those who return can tell us about how mental health and living conditions are irrelevant to "Quality of Life" as measured by the medical profession.

by Brian Easton on December 02, 2014
Brian Easton

You are correct, Barry, QALYs can be negative. The best measure is the EuroQol which surveys how people feel on five dimensions: mobility, self-care, usual activities (e.g. work, study, homework or leisure activities), pain/discomfort and anxiety/depression. Extrapolations indicate that some of these states may be worse than death.  I have never met a negative in my own work as an economist.


Moz raises some difficult issues, which may not affect an economist’s analysis, but do affect personal and clinical decisions. When an economist is looking at the cost-effectiveness of a particular treatment one has an average patient in mind so that it is not necessary to think about whether the person is a member of a huge extended family or whether they are a hermit nobody has heard of. However the clinician prescribing a treatment to a particular person may take such things into consideration.


Economists however, are curious, so we have asked people whether they think all life-years are equal. In turns out people do not (on average) in understandable ways. For instance they think a life-year of a mother with young children is more valuable than average.


A more interesting example is that even older people on average say that they don’t want as much treatment for an outcome as they think is justified for a younger person. We see this in practice when older people give ‘do not resuscitate’ instructions or ask not to have applied to them particular treatments (such as antibiotics). I’ve never seen this research finding factored into an economic analysis of a treatment but I should not be surprised if it is sometimes practically taken into consideration.


So economists have something to contribute to these issues but ultimately their contribution is not decisive. Of course, as individuals they face the same ethical issues as everyone else in particular circumstances. 

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