Every health system rations. Some do it through waiting lists, some through prices, some through what insurers refuse to cover, and some through a number most patients have never heard of. That number is the quality-adjusted life year, or QALY. In England, it sits behind decisions about which new medicines the NHS will fund. Understanding it is the difference between arguing about health technology decisions and merely being annoyed by them.
The definition
A QALY combines two things into a single unit: how long someone lives, and how well they live during that time.
One year in perfect health counts as one QALY. A year lived in a health state judged to be worse than perfect health counts as less than one. Death is zero. Some very severe health states can even be scored below zero, meaning they are valued as worse than being dead.
The quality weights, usually called utilities, typically come from questionnaires such as the EQ-5D, which asks patients about mobility, self-care, usual activities, pain or discomfort, and anxiety or depression. Their answers are converted into a single score using a “value set” derived from surveys of the general public about how they rate different health states.
A worked example
The numbers below are illustrative, chosen to make the arithmetic clear, not drawn from a real appraisal.
Imagine a new treatment for a chronic lung condition.
- With current standard care, patients live on average 4 more years, with a quality weight of 0.6. That is 4 × 0.6 = 2.4 QALYs.
- With the new treatment, patients live on average 5 more years, with a quality weight of 0.7. That is 5 × 0.7 = 3.5 QALYs.
- The gain is 3.5 − 2.4 = 1.1 QALYs per patient.
Now the cost. Suppose standard care costs £10,000 per patient over that period, and the new treatment costs £40,000. The extra cost is £30,000.
The key figure is the incremental cost-effectiveness ratio, or ICER: the extra cost divided by the extra health gained. Here that is £30,000 ÷ 1.1, or roughly £27,300 per QALY gained.
Is that good value? That depends on the threshold a system is willing to pay.
The threshold, and why it just moved
For more than two decades, the National Institute for Health and Care Excellence (NICE) in England used a threshold range of £20,000 to £30,000 per QALY. Treatments below that range were generally considered cost-effective; those above it needed stronger justification.
In December 2025, in the context of a US-UK trade agreement on pharmaceuticals, the UK government announced that the range would rise, and NICE confirmed that from April 2026 its standard threshold would be £25,000 to £35,000 per QALY. NICE has said it expects the change to lead to around three to five more medicines being recommended each year.
Our hypothetical treatment, at about £27,300 per QALY, sat in the middle of the old range. Under the new range, it sits near the bottom. A treatment that previously needed special justification might now pass more easily.
That illustrates the most important thing about a QALY threshold: it is not a scientific constant. It is a policy decision about how much a society is willing to pay for health, and it can be changed by a trade negotiation as well as by an economist.
A second worked example: the opportunity cost
The first example asked whether one treatment is good value. The more revealing question is what else the money could have bought. Again, these numbers are illustrative.
A regional health budget has £3 million to spend on something new. Two proposals arrive.
The first is a specialist drug for a rare, severe condition. It costs £60,000 per patient and delivers 1.5 QALYs per patient compared with current care. That is £40,000 per QALY. The £3 million would treat 50 patients and generate 75 QALYs.
The second is an expanded programme to find and treat people with undiagnosed high blood pressure. It costs £300 per person reached and delivers, on average, 0.02 QALYs per person, because most people reached gain a small amount of protection against future strokes and heart attacks. That is £15,000 per QALY. The £3 million would reach 10,000 people and generate 200 QALYs.
On QALYs alone, the choice is easy: the blood pressure programme produces well over twice the health for the same money. But look at who benefits. The drug produces large, visible gains for 50 identifiable patients with a severe disease. The programme produces small, statistical gains spread across 10,000 people, most of whom will never know that the stroke they did not have was prevented.
This is the tension the QALY exposes rather than creates. Decision-makers, and the public, tend to feel differently about identifiable patients and statistical ones, and about severe illness and mild risk. Whether a system should honour those feelings is a question about values. The QALY simply puts a number on how much health is given up when it does.
It also explains why economists care so much about the threshold. If a system approves the drug at £40,000 per QALY, and the money has to come from somewhere, it may displace services like the blood pressure programme. The official threshold says what a system is willing to pay for new treatments. The opportunity cost is what the system actually gives up to pay for them.
Two technical details that change the answer
Two features of real appraisals rarely make it into public debate, and both can move an ICER substantially.
The first is discounting. Health gains and costs that occur in the future are usually valued less than those occurring now. NICE’s reference case discounts both at 3.5% a year. That choice matters most for interventions whose benefits arrive late, such as prevention and vaccines, or for one-off treatments intended to work for decades, such as gene therapies. A small change in the discount rate can turn a cost-effective prevention programme into an expensive one on paper, without anything changing in the real world.
The second is the severity modifier. Since 2022, NICE has applied extra weight to QALYs gained by people with more severe conditions, measured by how much of their expected future health the disease takes away, known as the QALY shortfall. The weights are 1.2 or 1.7 depending on how severe the shortfall is. In practice, this means a treatment for a very severe condition can be judged against an effectively higher threshold. It is an explicit, numerical answer to the objection that the plain QALY ignores the special priority people give to the sickest patients.
Related terms worth knowing
DALY. The disability-adjusted life year is the QALY’s mirror image. Where a QALY counts healthy life gained, a DALY counts healthy life lost to disease, disability or early death. DALYs are more common in global burden-of-disease work and in priority-setting for low- and middle-income countries; QALYs dominate health technology assessment in high-income systems. The weights are derived differently, so the two are not directly interchangeable.
Willingness-to-pay threshold versus supply-side threshold. These two phrases describe very different ideas that often get blurred. A willingness-to-pay threshold asks how much society values a unit of health. A supply-side threshold asks how much health the existing budget currently buys at the margin, so that approving a new treatment above that figure would do more harm than good by displacing cheaper care. An influential analysis for the NHS by Karl Claxton and colleagues, published in 2015, estimated the supply-side figure at around £13,000 per QALY, well below NICE’s official range. The distance between those two numbers is the heart of the argument about whether raising the threshold helps or harms patients overall.
Budget impact. An ICER says nothing about total cost. A treatment can be cost-effective per QALY and still be unaffordable if millions of people are eligible. Many systems now look at budget impact separately, which is why a cheap-per-QALY treatment for a common condition can face more resistance than an expensive one for a rare disease.
Why systems use it
The case for QALYs is essentially about fairness and opportunity cost. Health budgets are finite. Money spent on one treatment is money not spent on another. Without a common unit, it is almost impossible to compare a cancer drug with a mental health programme or a hip replacement. The QALY lets decision-makers ask the same question of everything: how much health does this buy for the money?
It also makes trade-offs explicit. Systems that do not use QALYs still ration, but they tend to do it less transparently.
The limitations
The QALY has serious critics, and their objections deserve to be taken seriously rather than waved away.
- It can disadvantage older and disabled people. Because QALYs reward life-years gained, treatments for people with shorter life expectancy or pre-existing disability can appear to generate fewer QALYs. In the United States, the Affordable Care Act restricts the use of cost-per-QALY thresholds in certain federal programmes, reflecting exactly this concern.
- The weights come from the general public, not patients. People who have never lived with a condition often rate it worse than people who have adapted to it. Whose valuation should count is a genuine ethical question.
- It struggles with some kinds of value. Benefits to carers, the value of hope, the special weight people place on treating the most severely ill, and wider social benefits are hard to capture. NICE has added modifiers, such as a severity weighting, partly in response.
- The threshold is contested. Some economists argue that a threshold should reflect what the health system could produce by spending the money elsewhere, and that this figure may be lower than the official threshold. Raising the threshold makes new treatments easier to approve but may displace other care with greater health benefit.
- Precision can be illusory. An ICER of £27,300 looks exact, but it rests on estimates of survival, quality weights and costs, each uncertain. Good appraisals test how sensitive the answer is to those assumptions.
Where the arguments go next
Two developments are worth watching. The first is how the higher NICE range plays out in practice: whether more medicines are approved, as NICE expects, and whether anyone measures what services are displaced to pay for them. The second is how health technology assessment copes with one-off treatments such as gene therapies, which promise lifelong gains from a single, very expensive dose. For those, the QALY calculation depends heavily on assumptions about how long the benefit lasts, which trials cannot yet observe. That is where the tool’s precision is most likely to be illusory and where the political pressure will be greatest.
The bottom line
The QALY is neither a cold algorithm deciding who lives nor a neutral scientific truth. It is a tool for making unavoidable trade-offs more visible and more consistent. Its value depends heavily on the quality of the evidence fed into it, and on the threshold, which is a political choice.
Your view
Should health systems use QALYs to decide what to fund? If not, what would you use instead, and how would you make the trade-offs transparent? If you have worked on a health technology assessment, tell us where the QALY helped and where it failed. Share your view in the comments.
