D. Cost-Utility Analysis Using Cost per QALY

As noted above, QALYs are often used in cost-utility analysis for the purposes of optimizing allocation of health care spending to maximize QALYs gained, and thereby maximize social welfare. Cost per QALY gained, i.e., the marginal (additional or incremental) cost required to gain 1.0 QALY by using a technology, is one means to quantify the value to society of using that technology instead of the alternative(s). Because the QALY incorporates length of life and quality of life but is not specific to any particular disease state or condition, it enables cost-utility comparisons across virtually the entire spectrum of health care interventions.

As shown in Box V-8, a cost per QALY analysis can account for large differences in technology costs, survival, and quality of life. Here, cost utilities are compared for three alternative therapies for a particular disease, end-stage heart disease.

An early, controversial example of using cost-utility analysis to assess the relative societal benefits of a diverse range of technologies is shown in Box V-9. In this type of list (sometimes known as a “league table”), allocating health care spending for the technologies higher on the list is more efficient (i.e., purchases the next QALY at lower cost and therefore enables maximizing the QALYs purchased) than allocating those resources to technologies further down the list. That is, the technologies on that list are arranged in order of greatest to least cost utility.

Box V-8. Cost-Utilities for Alternative Therapies for End-Stage Heart Disease

Outcomes and Costs by Therapy*

*Costs and outcomes were discounted at 3% per year; 20-year horizon. Mean utilities derived using time-tradeoff method on scale for which 1.0 was well, 0.0 was death, and states worse than death were valued between 0.0 and -1.0.

Cost-Utility Ratios for Therapy Comparisons

This cost-utility comparison indicates that, for patients with end-stage heart disease, both heart transplantation and the total artificial heart yield more quality-adjusted life years at higher costs compared to conventional medical therapy. However, the cost-utility ratio of heart transplantation vs. conventional medical treatment is preferred to (i.e., lower than) the cost-utility ratio of total artificial heart vs. conventional medical therapy. Also, compared to heart transplantation, the total artificial heart costs more and results in fewer quality-adjusted life years, and therefore the total artificial heart is “dominated” by heart transplantation.

Adapted from estimates provided in: Hogness JR, Van Antwerp M. The Artificial Heart: Prototypes, Policies, and Patients. Washington, DC: National Academy Press; 1991.

Box V-9. Cost per QALY for Selected Health Care Technologies

This table ranks selected procedures for a variety of health problems according to their cost utility, (i.e., the amount of money that must be spent on each procedure to gain one more QALY). There were some methodological differences in determining costs and QALYs among the studies from which these results were derived. Nonetheless, giving considerable latitude to these figures, the range in the magnitude of investment required to yield the next QALY for these treatments is great. This type of "bucks for the bang" (here, British pounds for the QALY) analysis helps to illustrate implicit choices made in allocating scarce health care resources, and suggests how decision makers might move toward reallocating those resources if the allocation rule is intended to optimize societal gain in net health benefits (e.g., as measured using QALYs).

Source: Maynard A. Developing the health care market. Econ J. 1991;101(408):1277-86. Copyright © 1991. Blackwell Publishing Ltd. Reprinted with permission of Blackwell Publishing Ltd.

In some instances, the impact of a technology on survival may be sufficiently great as to diminish its relative impact on HRQL, such that there is little need to adjust survival for HRQL. In other instances, the impact of an intervention on HRQL is great, and adjusting survival for it to determine the QALYs gained will affect the relative cost-utility of alternative interventions (Chapman 2004; Greenberg 2011).

An example of a league table of costs per DALY gained for several interventions in low-to-middle-income countries is shown in Box V-10.

Box V-10. Cost per DALY Gained for Selected Interventions inLow- and Middle-Income Countries

¹Cost per DALY represents an average for low- and middle-income countries, except where noted.

²Directly observed treatment short course (DOTS) for epidemic infectious tuberculosis

³Refers to South Asia only; includes measures to address life-threatening complications

Source: Disease Control Priorities Project, Using Cost-Effectiveness Analysis for Setting Health Priorities. March 2008. Calculations based on Chapters 2, 16, 26, and 33 of: Jamison DT, Breman G, Measham AR, et al., eds., Disease Control Priorities in Developing Countries. 2^nd ed. New York: Oxford University Press; 2006.

Certain methodological aspects and the proposed use of QALYs or similar units in setting health care priorities remain controversial (Arnesen 2000; Gerard 1993; Nord 1994; Ubel 2000). Research on public perceptions of the value of health care programs indicates that health gain is not necessarily the only determinant of value, and that an approach of maximizing QALYs (or other HALY or similar measure) per health expenditure to set priorities may be too restrictive, not reflecting public expectations regarding fairness or equity. For example, because people who are elderly or disabled may have a lower “ceiling” or potential for gain in QALYs (or other measure of HRQL) than other people would have for the same health care expenditure, making resource allocation decisions based on cost-utility is viewed by some as being biased against the elderly and disabled. A review of such concerns in the context of analyses of cancer care by the UK NICE cited three potential limitations: 1) insufficient sensitivity of the EQ-5D HRQL instrument to changes in health status of cancer patients, 2) diminished validity of certain assumptions of the time-tradeoff method for estimating the values of various health states for patients at the end of life, and 3) relying on using members of the general population rather than actual cancer patients to estimate the values of various health states (Garau 2011).

Certain cost-per-QALY-gained levels have been cited as informal decision thresholds for acceptance of new interventions (e.g., the equivalent of $50,000 or $100,000 per QALY in the wealthy nations); however, analyses of societal preferences suggest much higher levels of acceptance (Braithwaite 2008). Further, without recognition of any limits to providing all potentially beneficial health technologies to all people, such a threshold for the acceptable cost of a QALY has little relevance (Weinstein 2008). Comparisons of the cost per QALY gained from various health care interventions in widespread use can be revealing about how efficient health care systems are in allocating their resources. A continuously updated, detailed set of standardized cost-utility analyses, including tables of cost-utility ratios for many types of health care interventions, can be found at the Cost-Effectiveness Analysis Registry, maintained by the Tufts Medical Center.

QALYs and other HALYs can enable comparisons among health technologies that have different types of health effects and help to inform resource allocation. Given their relative strengths and weaknesses, these measures are preferable to other measures of health improvement when it is important to make comparisons across diverse interventions. Aside from methodological considerations, their use has been limited by various political and social concerns (Neumann 2010). The relevance of cost-utility analysis for resource allocation depends, at least in part, on how health care is organized and financed.