How economists think about valuing life when allocating resources for healthcare purposes.

Pundit: 28 November, 2014

Keywords: Health;

A couple of comments to an earlier column asked questions about the quality of life versus the prolongation of life. It might be useful to set out an economic perspective on the broad issue, while acknowledging the economists do not have the last word. However, as a very brief account of my long-standing involvement with the topic shows, economists cannot avoid the issue because of its resource implications.

When I was young I thought the function of medicine was to save lives. With a little bit of maturity I realised that since we all die once, medicine was only prolonging life. However different treatments uses resources which may prolong lives to different extents. How are we to allocate the available resources?

A health economist hits this problem in all sorts of ways but here is an interesting example. It is well known that more deaths are attributable to the use of tobacco than to the misuse of alcohol. But tobacco deaths occur much later in life than many of the alcohol deaths. While a smoker dying at 70 may lose 15 years of life, a drinking teenager may lose 60 years in a crash. Allow for that and the total years of life terminated by alcohol misuse are much closer to the life-years terminated by tobacco use. A death count is misleading.

But even the notion of life-years is not refined enough. About 15 years ago I was working on whether a particular (costly) drug should be provided by the public health system to those with multiple sclerosis. As far as could be ascertained, it did not prolong the sufferer’s life. But it could make a huge difference to its quality, by delaying the onset of the more advanced stages of the disease and moderating its impact. A life-year only evaluation would give the nonsensical answer to never use the drug since there were no gains in life-years from using it. Yet there were people purchasing the drug for themselves; they were certainly not behaving nonsensically.

Fortunately economists had been developing a relevant measure called a QALY – quality of life adjusted year. Its value is unity for a person with good health, zero for those who are dead and a number between reflecting where there the quality of life was less than good but not as bad as death. Measuring the exact proportion for each condition is not easy, but there has been a huge effort to develop good measures.

That incorporates the prolongation of life into the quality of life, giving greater weight to years of better health. The economic analysis would value, say, a treatment which gave three years of 0.8 QALYs (a total of 2.4 QALYs) over the alternative of five years of 0.3 QALYs. (!.5 QALYs) Note that while the economic analysis may be saying that it is rational (in resource terms) to provide the treatment, it is for the patient to choose whether to take on a treatment which gives them a shorter life, but of better quality. (Others may be involved in making the decision – this is not something on which economics is well-placed to have an opinion.)

The adoption of QALYs might lead economists into further questioning the relevance of GDP (or income) in making judgements about a person’s (or group of persons’) wellbeing. I have fiddled around on the edges of this (as have some of the profession’s virtuoso violinists). Basically, QALYs work best for physical health status. (I am not sure they even work well for mental health status.) They are not designed to measure overall wellbeing or happiness. You can combine QALYs with income but the outcome is odd. But that is another story. And probably one we shall see steadily progressing.