How a QALY Is Calculated and What It Cannot Capture

A quality-adjusted life year, or QALY, is a single number built from two ingredients: how long a person lives and how good that time is judged to be. You take the length of time spent in a given health state and multiply it by a utility weight for that state, where 1 represents full health and 0 represents being dead. Sum those products across the states a person moves through, and you have their QALYs. One year in full health equals one QALY; two years lived at a utility weight of 0.5 also sum to one QALY. The construction is deliberately simple so that treatments for very different conditions can be placed on a common scale, and that same simplicity is the source of nearly every criticism the measure attracts.

The two inputs, and where the numbers come from

The time input is usually taken from clinical trials, survival data, or a model that projects how a condition progresses. The harder input is the utility weight. It is not a clinical measurement like blood pressure. It is a value that expresses how desirable a health state is judged to be, and it has to be elicited from people. As the NICE glossary puts it, each year of remaining life is weighted by a quality-of-life score on a 0 to 1 scale.

Three methods dominate. The time trade-off asks how many years in full health a respondent would consider equivalent to a longer period in a poorer state. The standard gamble asks what risk of immediate death someone would accept for a chance at full health rather than living in the impaired state. And multi-attribute instruments such as the EQ-5D ask people to classify their health across a fixed set of dimensions (mobility, self-care, usual activities, pain or discomfort, and anxiety or depression), then convert that description into a single index using a value set derived from a general-population survey.

Two features of this process deserve attention. First, some health states are valued as worse than death, so utility weights can fall below zero; a state at -0.2 subtracts from the total rather than adding to it. Second, the number attached to, say, moderate disability depends heavily on which method was used and which population was surveyed. The person living with a condition and a member of the public imagining it often assign different values, and the choice between those perspectives is a methodological decision with real consequences for the result.

How the number gets used

QALYs become a decision tool when paired with cost. Analysts compute an incremental cost-effectiveness ratio, or ICER: the extra cost of a new treatment divided by the extra QALYs it produces, expressed as a cost per QALY gained. A lower cost per QALY signals better value.

The National Institute for Health and Care Excellence (NICE) in England illustrates how this feeds into appraisal. Its health technology evaluations manual sets QALYs as the reference-case measure of health effect and, for adults, prefers the EQ-5D to capture quality of life so that comparisons stay consistent across evaluations. Historically, NICE has treated interventions with a most plausible ICER below roughly £20,000 per QALY as generally cost-effective, with acceptance up to about £30,000 requiring additional justification such as greater uncertainty or wider benefits. NICE has stated that this range will move to £25,000 to £35,000 once a change in regulations gives it the power to apply the higher figures, a change it has announced as agreed but described as contingent on that regulatory step rather than already in force. Costs and health effects are both discounted, currently at 3.5% a year, so a QALY gained far in the future counts for less than one gained now.

NICE also applies a severity modifier: conditions that impose a larger QALY shortfall, measured in both absolute terms and as a proportion of the health a person would otherwise have expected, can have their QALYs weighted more heavily, by a factor of 1.2 or 1.7. As a peer-reviewed account from authors at NICE and the University of Sheffield documents, this modifier replaced an earlier end-of-life modifier, and it is an explicit acknowledgment that a plain QALY count does not, on its own, reflect how much is at stake for the sickest patients.

What the QALY cannot capture

The severity modifier hints at the deeper limitation: an unadjusted QALY treats every quality-adjusted year as identical no matter who receives it. A year gained by someone young and a year gained by someone near the end of a long illness count the same. That neutrality is defended as fairness by some and questioned as blindness by others, and both readings describe the same arithmetic.

Several specific gaps are well documented. Because the measure rewards gains in both length and quality of life, interventions that mainly help people who start from a permanently lower utility, such as some people living with disability, can generate fewer QALYs for the same clinical effort, raising longstanding concerns that the metric can disadvantage them. Averaged population value sets can misrepresent the experience of people who have actually adapted to a condition. The EQ-5D's five dimensions leave out much of what people care about, including cognition, relationships, dignity, and the value of information or reassurance. Carer burden, productivity, and effects that fall outside the health system are excluded from a narrow reference case. And the whole apparatus is sensitive to modelling assumptions and to the discount rate, so two competent analyses of the same treatment can produce different ICERs.

None of this makes the QALY useless. It makes it a structured, transparent input rather than a verdict. When you read that a treatment costs a certain amount per QALY, the useful questions are which utility method and population produced the weights, what time horizon and discount rate were assumed, and what was left out of the model. A QALY is an estimate that carries its assumptions inside it, and appraising a health technology claim means appraising those assumptions rather than the single number they produce.

This article is educational and not medical advice.