health state evaluation and utility theory

Valuing health outcomes is a fundamental concern in health economics. This article considers a measure of health outcomes: the Quality Adjusted Life Year (QALY). The QALY has been used extensively for two main reasons: (1) it arguably values health outcomes in a more acceptable metric than money does; and (2) it feeds more easily into the wider medical decision-making. To be an acceptable measure of health state preferences, however, the QALY requires a number of restrictive assumptions to hold. We discuss these assumptions and conclude that, if these do not hold, the QALY reverts to a measure of health state rather than to a health state preference.