QALYs AND COST-UTILITY RATIOS-COMPARING ORANGES TO ORANGES, ORANGES TO APPLES

Yesterday’s post introduced the concept of QALYs (Quality-Adjusted Life Years). QALY is a formula for measuring the long-term effectiveness of a healthcare treatment or intervention. QALYs are often combined with a cost factor to assess and compare the relative value of a treatment or intervention. QALYs give healthcare economists and policy makers an important, if somewhat limited, method of valuing the cost and effectiveness of treatments across populations.

KEEP YOUR EYES ON THE COIN

More examples. The cost of Treatment B for a disease is $50,000 and it yields 5 QALYs. The cost of Treatment A is $70,000 and it yields 6 QALYs. The calculation to compare the cost-utility ratios is:

Cost of Treatment A – Cost of Treatment B
__________________________________
No. of QALYs produced by Intervention A -
No. of QALYs produced by Intervention B

But before we run the calculation, let’s look at the cost of CALYs for each treatment. Treatment B yields 5 QALYs and costs $50,000. Five CALYs/ $50,000 = $10,000 per CALY.

Treatment A yields 6 QALYs but costs $70,000. Six CALYs/ $70,000 = $11,666 per CALY. So on its face, Treatment B is the more cost effective deal. But it should also be remembered that Treatment B yields 6 CALYs, one more year than Treatment A. Maybe that extra CALY is “worth it”. Let’s see what the cost-utility ratio is and then decide.

$70,000 (cost of treatment A) - $50,000 (cost of treatment B)
___________________________________________
6 QALYs (treatment A) – 5 QALY’s

$20,000
______
1

This means it costs $20,000 to yield 1 additional QALY. Cost effective? Who knows. But under current “QALY” cost-utility quidelines”, $20,000 per QALY is often seen as cost-effective. And for reasons we will look at in the next post, anything up to $50,000 per QALY is usually seen a “cost-effective”.

COST-UTLILITY RATIOS DRIVE THE SUN AND WIND IN THE DESERT OF THE REAL!

NEW MEXICO HOMESTEADERS-OCTOBER 1940

Faro and Doris Caudill, homesteaders in Pie Town, New Mexico. Pie Town is southwest of Albuquerque.

Faro would seem to be an unusual first name. Faro was a card game popular with gamblers in the old west. Wyatt Earp, gunfighter and law man, was a Faro dealer.