QALYs, DALYs, and the Economics of Health Policy
Health systems everywhere face the same underlying problem: resources are finite, and treatments compete for the same budget. Deciding which treatments to fund requires some way of comparing very different kinds of benefit — a treatment that extends life against one that improves its quality, a rare disease against a common one, a young patient against an old one. Health economics developed the quality-adjusted life year specifically to make that comparison possible.
What a QALY measures
A quality-adjusted life year, or QALY, combines two dimensions of health outcome into a single number: how long a person lives, and how well they live during that time. One year of life in full health counts as one QALY. A year lived in a health state considered half as good as full health counts as 0.5 QALYs. A treatment's value can then be expressed as the number of QALYs it is expected to add, and its cost-effectiveness as cost per QALY gained — a common currency that lets a hip replacement be compared against a cancer drug.
The quality weights themselves come from preference-elicitation studies, in which people are asked to make tradeoffs between different health states, often using standardized instruments. This ties QALYs conceptually to preference-satisfaction theories of welfare: the "quality" weight is meant to reflect how much a health state is preferred, not simply a clinician's judgment of severity.
DALYs: the global health counterpart
The disability-adjusted life year, developed for the World Health Organization's Global Burden of Disease studies in the early 1990s, measures the same underlying tradeoff from the opposite direction. Rather than counting years of healthy life gained, a DALY counts years of healthy life lost to a condition — combining years lost to premature death with years lived with disability, weighted by severity. Where QALYs are typically used to evaluate treatments within a health system, DALYs are more often used to compare the overall burden of different diseases across populations, informing where global health resources should be directed.
Cost-effectiveness thresholds
Once benefits are expressed in QALYs, health systems can set an explicit threshold: fund treatments below a certain cost per QALY, and decline to fund those above it. The United Kingdom's National Institute for Health and Care Excellence is the most well-known example of an agency that uses this kind of explicit threshold in deciding whether treatments should be funded by the National Health Service.
This makes healthcare rationing decisions more consistent and transparent than case-by-case judgment would allow, and it directly operationalizes a version of the social welfare function problem discussed elsewhere on this site: it requires the agency to treat a QALY gained by one patient as commensurable with a QALY gained by any other, regardless of who they are.
The disability critique
That commensurability assumption is exactly what generates the most serious ethical objection to QALY-based allocation, sometimes called the "double jeopardy" argument. A treatment that extends the life of someone with a pre-existing disability, by construction, produces fewer QALYs than the identical treatment given to someone in full health — because the quality weight for the remaining years is lower. Critics argue this means people with disabilities are effectively penalized twice: once by the disability itself, and again by a resource-allocation rule that counts their remaining years as worth less.
Defenders of QALY-based allocation respond that the alternative — ignoring quality of life entirely and allocating purely by years of life extended — has its own serious problems, since it would treat a treatment that extends life in severe, unrelieved suffering as equally valuable to one that extends it in good health. The disagreement is not really about whether quality of life matters, but about whether a single aggregated number can fairly represent it across people whose baseline circumstances differ sharply.
Aggregation and the "fair innings" debate
A related objection concerns age. Because QALYs count total years gained, treatments benefiting younger patients typically produce more QALYs than identical treatments benefiting older patients, simply because younger patients have more years ahead of them. Some ethicists defend this as a reasonable "fair innings" principle: an younger person who dies early has had less of a full life than an older person, so priority to the young partially equalizes total lifetime welfare. Others argue it constitutes unjustified age discrimination built into the metric itself.
A worked example of the underlying tension
Consider two treatments, both costing the same amount per patient. Treatment A extends life for a general population by one year in full health. Treatment B extends life for people with a chronic disability by one year in a health state weighted at 0.6. A strict cost-per-QALY threshold will favor funding Treatment A first, even if both treatments are medically identical in what they do — extend life by the same amount — because the quality weighting treats the disabled patients' additional years as producing less social value. This is precisely the case the disability critique targets, and it illustrates why QALY thresholds, however useful for consistency, cannot be treated as an ethically neutral technical tool.
Where this leaves policy
Most health systems that use QALYs do not apply the threshold mechanically. NICE and comparable agencies build in exceptions, higher thresholds for end-of-life and rare-disease treatments, and equity weightings that partially offset the disability and age critiques. These adjustments are themselves evidence of the underlying point: QALYs make interpersonal welfare comparisons explicit and auditable, which is a genuine improvement over implicit rationing, but the comparisons they make explicit remain ethically contested rather than resolved by the metric itself.