Conor Day explores how healthcare providers apply economics to healthcare decisions.
As long as there is scarcity in the world, choices will have trade offs. Healthcare is not exempt from the problem of scarcity, whether that be in terms of funding, infrastructure or staff. How do we compare apples and oranges? How can you measure the value of providing people with ozempic against investing in new life saving medicine?
Cost effectiveness analysis was first developed within the US military in the mid twentieth century for assessing weaponry - the phrase “bang for your buck” has a more literal meaning than you may realise. The US Department of Health was quick to adopt this framework for healthcare interventions, with many healthcare systems around the world following suit.
A widely-used metric of cost effectiveness in healthcare is the Quality-Adjusted Life Year, or QALY. Academics recognised the need for an assessment index that accounted for the multiple factors in healthcare outcomes. Two individuals may be cured of a disease, but have drastically different outcomes in terms of their health and subsequent lifespan. The QALY is a measure of health, health being a function of both length and health-related quality of life.
One method to calculate health-related quality of life is the Standard Gamble. On a scale of 0 to 1, 0 is death and 1 is perfect health. If a patient feels indifferent between remaining in their current state compared to a risky surgery with a 50% chance of restoring them to perfect health but a 50% chance of death, their health-related quality of life is 0.5.
Another method of measuring health-related quality of life is the Time Trade off Method, where the patient is given the choice between a period of time, for example 5 years with diminished health or a shorter length of time 2.5 years of perfect health, for example. If they are indifferent between these two options, the weight given is 2.5/5, with 0.5 being the quality of life weighting.
The QALY is a pervasive feature of modern healthcare systems despite its limitations. Is the Standard Gamble Method too heavily influenced by an individual's level of risk aversion, rather than a true assessment of health? The influence of the interview may be significant with the trade-off method - there is potential for minor verbal reinforcements to influence how the interviewee responds. The elderly consistently score lower on QALY assessments because they statistically have less life ahead of them. It also begs the question of whether children possess the ability to assess their own level of health and quality of life.