Quality-Adjusted Life Years (QALYs) in healthcare decision making

DOI: https://doi.org/10.58248/RR110  

The National Institute for Health and Care Excellence (NICE), overseen by the Department of Health and Social Care, provides evidence-based guidance on treatments and services in the NHS. Its core purpose is “to help practitioners and commissioners get the best care to patients, fast, while ensuring value for the taxpayer”.  

Since March 2000, NICE has made over 1,500 recommendations of which treatments the NHS will fund, and which it will not. These recommendations evaluate if treatments work (effectiveness) and are good value for money (cost-effectiveness). This is informed by an outcome metric, the Quality-Adjusted Life Year, or QALY, which combines: 

• how long someone lives 
• how good their quality of life is during that time 

One QALY equals one year lived in full health. Similarly, two years lived at 50% of full health also equal one QALY. 

NICE uses extra cost per QALY gained to assess value for money. This briefing explains how QALYs are calculated and applied, and discusses their strengths, limitations, and implications for decision-making. 

What are QALYs used for? 

Decisions about which treatments and services to fund are made considering finite healthcare budgets. This can involve trade-offs, as spending on one area may reduce the resources available for others. 

To help inform these decisions, policymakers and healthcare organisations use methods that compare the costs and outcomes of different interventions. These may include treatments that extend life, improve quality of life, or prevent illness. 

The QALY was designed to provide a consistent unit for comparing health gains across different interventions and populations. QALYs are used across health and care to help evaluate health technologies, public health programmes, commissioning decisions, health services, and research priorities. 

How do QALYs measure how ‘good’ someone’s quality of life is? 

Health-related quality of life (HRQoL) measures aim to capture the impact of disease on peoples’ lives while remaining focused on aspects of life influenced by health care. This involves two steps: describing a health state and attaching a numerical value to it. 

1. Describing a health state: NICE recommends using the EQ-5D-5L, a standardised questionnaire, to evaluate a person’s health state. It asks people to rate themselves across five dimensions of daily life: mobility, self-care, usual activities, pain or discomfort, and anxiety or depression. The EQ-5D-5L responses range from no problem (1) to extreme problem or unable to do (5). 
2. Converting health states into a number: The responses are turned into a score using an algorithm known as value sets, which reflects how the public value different health states. In March 2026, NICE announced the updated EQ-5D-5L value set. This converts the five responses into a single score, ranging from 1 (full health) to 0 (equivalent to being dead), with negative values for states considered worse than death. This score is used to calculate QALYs. 

Hypothetical example 

Helen is a 55-year-old woman living with a long-term health condition. Before treatment, she finds walking difficult, needs help washing and dressing, finds it difficult to complete household tasks, experiences persistent pain, and experiences frequent anxiety about her health. Her health-related quality of life is estimated at 0.61, meaning that each year lived in this state is valued as 0.61 QALYs. 

Without treatment, if she lives for another three years, she will experience 1.83 QALYs (0.61 × 3 years). 

After receiving a new treatment, she can walk longer distances with only minor limitations, can wash and dress herself independently, and experiences much less pain and anxiety. Her health-related quality of life improves to 0.97, equivalent to 0.97 QALYs for each year lived in this state. 

If the treatment also helps her live longer, and she lives for another five years rather than three, she would experience 4.85 QALYs (0.97 × 5 years). 

Compared with receiving no treatment, the new treatment generates an additional 3.02 QALYs. These gains reflect both improved quality of life during the first three years and the two additional years of life gained because of the treatment. This is summarised in the infographic below. 

 

How are QALYs used in decision-making? 

The most well-known use of QALYs is NICE’s technology appraisal programme, which assesses medicines, devices, diagnostics, and procedures for use in the NHS. 

NICE’s Incremental Cost-Effectiveness Ratio (ICER) calculates the additional cost of a new intervention divided by the additional QALYs it generates compared to existing care options. The ICER is then compared against a threshold to decide whether the treatment represents good value for money for the NHS. Until April 2026, the NICE cost-effectiveness threshold was set at £20,000 to £30,000 per QALY. Under this threshold, NICE recommended around 91% of the medicines that they evaluated, around 70 per year. 

Under the UK–US pharmaceuticals arrangement, the government increased the cost-effectiveness thresholds used by NICE in April 2026, to £25,000 to £35,000 per QALY. The change aimed to increase patient access to new medicines and support the UK life sciences sector by making the UK a more attractive environment for innovation and investment. NICE has predicted that this will allow them to recommend an additional three to five medicines per year. 

Severity modifiers 

Since 2022, NICE has applied a severity modifier that gives extra weight to benefits for people with the most severe illnesses, making it more likely that treatments for these patients will be recommended.  

Severity is measured by calculating how many healthy life years a patient loses by having the condition (QALY shortfall), compared to someone of the same age and sex who does not have the condition.  

NICE then adjusts QALYs gained based on severity levels (1.2 for moderate severity and 1.7 for high severity). For example, a calculated QALY gain of 3.02 would be increased to 5.13 for a highly severe condition, after the severity modifier is applied (3.02 x 1.7 = 5.13).  

The severity modifier replaced NICE’s end-of-life modifier, which was in place between 2009 and 2022. The end-of-life modifier applied higher weights to health gains from life-extending treatments for patients who have a relatively short life expectancy. NICE introduced the severity modifier following a methods review, which favoured considering broader benefits beyond life expectancy and extension. 

There have been concerns about how the use of severity modifiers in NICE appraisals can influence treatment recommendations, raising questions about the consistency, transparency and fairness of decision-making across different diseases and patient groups. For example, NICE’s decision not to recommend the breast cancer drug Enhertu for routine NHS use prompted debate about how much severity weighting affected the evaluation and final recommendation. 

Compared to end-of-life modifiers, severity modifiers have resulted in higher proportion of positive recommendations overall (84% vs 83%), for cancer treatment (80% vs 75%) and for advanced cancer treatment (81% vs 69%). 

Rare diseases 

For medicines treating very rare diseases (known as ‘Highly Specialised Technologies’), NICE applies a higher ICER threshold for cost per QALY of £100,000 to £300,000. This approach aims to address challenges of generating robust evidence in very small populations with rare diseases, encourage research and innovation, and ensure fair and equitable access to treatment. The thresholds for rare diseases are not affected by the UK–US pharmaceutical agreement. 

How are QALYs used internationally? 

A 2026 review of 19 high-income countries in the Organisation for Economic Co-operation and Development (OECD) found that most (15/19) use QALYs in decision-making. However, only three (England, Ireland, and the Netherlands) have a formal and explicit cost-per-QALY threshold. Many countries apply modifiers for severity, rare diseases and other factors. There is limited evidence on the impacts of differing approaches between countries. 

Research shows cultural differences in how people in different countries value health states. NICE uses UK-derived scores to ensure NHS funding decisions reflect UK public values. 

What are the limitations of QALYs? 

Some researchers say that QALYs can disadvantage certain groups, particularly older and disabled people, who often report lower quality of life. Others have said that QALYs may not fully capture mental health, social care outcomes, and wider societal benefits. 

Some researchers have also said that NICE’s cost-per-QALY threshold lacks a strong empirical basis. There have been developments to mitigate some of these limitations, for example, extra items in the EQ-5D-5L questionnaire. 

NICE’s cost-effectiveness threshold remained unchanged between 1999 and 2026, despite inflation and rising NHS costs. Industry bodies have said this may have underestimated the value of health improvements and set an increasingly high bar for new treatments. 

While the NICE threshold was raised in 2026, some commentators have noted that the new threshold (£25,000–£35,000 per QALY) is still lower than values used elsewhere in government appraisal, such as HM Treasury’s Green Book (£70,000 per QALY). However, the measures are not directly comparable as they are designed for different purposes. The Green Book estimates societal value, whereas NICE’s threshold reflects NHS budget constraints and opportunity costs. 

Although some commentators argue that the threshold remains too low, raising it further also has risks. Some researchers warn that, if the threshold is too high, approving a new intervention could result in larger health losses elsewhere in the NHS than the health gains it produces. Others have highlighted that, while a higher threshold may improve access to new treatments and make the UK more attractive for life sciences, it could also encourage higher pricing and divert resources from other NHS services. 

Alternative health and wellbeing measures 

Alternative approaches include: 

• Disability-Adjusted Life Years (DALYs): measure the total burden of disease by combining years of life lost due to early death and years lived with disability. They are mostly used for economic evaluation in global health settings. While QALYs measure health gained, DALYs measure reduction in health lost with an intervention. Both combine length and quality of life but use different scoring frameworks. 
• Equal Value Life Years (evLY): developed by US cost-effectiveness frameworks to directly address the way QALY analysis may disadvantage some groups. It measures life extension and values all years of life gained equally regardless of the patient’s underlying health state.  
• Capability well-being measures: aim to measure broader aspects of wellbeing, such as relationships, autonomy, achievement and progress. 
• Wellbeing Years (WELLBYs) incorporate subjective wellbeing, happiness and life satisfaction alongside health. 
• EQ Health and Wellbeing (EQ-HWB): a new measure introduced around 2022 which aims to complement EQ-5D-5L and assess health and wellbeing, beyond health-related quality of life, of patients, social care users and carers.    

Policy considerations 

Does the QALY reflect health gains fairly across all groups? 

Equal weighting of every QALY can disadvantage patients starting from a lower health baseline. The severity modifier partially addresses this, but it does not fully resolve equity concerns and makes no adjustment for socioeconomic deprivation. Should equity weights be made more explicit, and how should they be set? 

Are the measurement tools fit for purpose? 

The EQ-5D-5L has recognised limitations for mental illness and social care. It does not capture many non-health benefits. Do QALY estimates adequately capture what matters to people? Should any complementary outcome measures be considered alongside? 

What monetary value should be placed on a QALY and how much should the NHS be willing to pay for one extra year in good quality life? 

NICE applies a cost-per-QALY threshold in the region of £25,000 to £35,000 per QALY. Questions remain on whether this range strikes the right balance given that money spent on one treatment cannot be spent elsewhere in the NHS, and on how the amount should be determined and revised over time.  

Acknowledgements  

• Dr Esubalew Assefa is a health economist at the Health Economics and Policy Research Unit (HEPRU), Queen Mary University of London. 
• Dr Yan Feng is a Reader in Health Economics at HEPRU and Deputy Lead of HEPRU. 
• Professor Borislava Mihaylova is a Professor of Health Economics at HEPRU and Lead of HEPRU. 
• POST is grateful to the authors for kindly giving their time to produce this briefing.  
• Questions about this briefing should be referred Clare Lally (post@parliament.uk), who acted as parliamentary lead for this work.