Here is an interesting blog post on the “forbidden topic” of health care cost-effectiveness. It’s hard because at the personal, human level life and health are of course priceless. But at the scale of a country or civilization with limited resources, there are choices to make, and better information should allow better choices.

Research in this area can be difficult to perform. One of the reasons is that it’s not always easy to measure health outcomes. Some things, like death, can be relatively easy to define, but how do you quantify having diabetes,asthma or a seizure disorder?

A robust methodology exists for doing so, based upon the expected utility theory of John von Neumann and Oskar Morgenstern. Asking people to consider what risks they will take to avoid certain health states, a technique known as the “standard gamble,” can yield what we call a utility value. Another method, which asks people to think about the trade-off between a shorter life in perfect health and a longer life in an unhealthy state (this is a “time-trade-off”) can also be used to determine a utility value.

When you take a utility value and multiply it by a number of years, you can calculate “quality-adjusted life years,” or QALYs. So if interventions improve quality or add years of life (or both), the number of QALYs goes up. Taking the cost of a therapy and dividing it by the number of QALYs gained results in a measurement of cost effectiveness.