7The Economist's Toolkit: QALYs, ICERs and Thresholds
Deciding whether an implant is worth it is an economic question, and economists have a small, precise vocabulary for it. This module builds that toolkit: the QALY as utility times time, the ICER as cost per QALY, and the discount rate, perspective and threshold that turn a cost-per-QALY into a funding decision. By the end you should be able to read a cost-utility paper and judge whether its bottom line is robust.
FUtility and the QALY: putting a number on a year of life
Health utility is a single number anchored at 0.00 (death) and 1.00 (perfect health), letting health states be both ranked and given cardinal value. A QALY is utility multiplied by time: 20 years at utility 0.2 yields 4 QALYs, and the same 20 years at 0.6 yields 12. Profound deafness in adulthood carries a mean utility decrement of roughly -0.46, with losses spanning -0.36 to -0.63 by instrument.[1986][1989][1996][1999]
TEliciting utility: direct methods and off-the-shelf instruments
Utility is elicited directly by visual analogue scale, time trade-off (forgoing healthy time to escape the state) or standard gamble (certain impairment versus a risky chance of perfect health). Generic preference-based instruments use population tariffs: EQ-5D scores five dimensions, SF-6D six, and HUI3 eight attributes including an explicit hearing item. Generic tools register implant benefit mainly through non-hearing domains and may underestimate hearing-specific gain; disease-specific tools like the CIQOL are more sensitive. Adult recipients show HUI3 utility gains of roughly +0.19 to +0.26 after implantation.[1996][2001][2019][2009]
TThe ICER: the price of an extra QALY
The ICER divides net cost (evaluation, surgery, rehabilitation, lifelong maintenance) by net QALYs, giving a cost per QALY gained. Pooled adult CI analyses yield about +0.26 QALYs and a weighted-average cost-utility near $12,847 per QALY, individual studies spanning $9,000 to $31,177. A complete reckoning includes follow-up, complications, replacements and warranties, with surgical morbidity counted as a temporary utility dip.[2009][1999][1999][1996]
TDiscounting and perspective: whose costs, and when
Future costs and benefits are discounted (commonly about 5% per year) to a present value before the ICER is computed. A health-system perspective counts only direct medical costs; a societal perspective adds indirect costs such as lost productivity, caregiver burden and education. The societal view sharply improves the paediatric case, where mainstream schooling offsets special-education costs of $30,000 to $200,000 per child per year and can drive net savings.[2006][2000][2000][2006]
FThresholds and sensitivity analysis: turning a ratio into a decision
NICE treats roughly GBP 20,000 to 30,000 per QALY as the threshold; UK unilateral CI analyses fall within it, some near GBP 10,000 per QALY. WHO-CHOICE calls an intervention cost-effective under 1 to 3 times GDP per capita per QALY, easily cleared in high-income countries but often failed where the ceiling is only $1,500 to $4,500. Sensitivity analysis varies discount rate, device longevity and utility estimates; the spread of published cost-per-QALY figures reflects these assumptions.[2009][2002][2021][2006]
Which single change is most likely to move this programme from not cost-effective to cost-effective, and why?
A patient is expected to live 25 more years. Without an implant her utility is 0.45; with one it rises to 0.70 for life. Ignoring discounting and costs, how many QALYs does the implant gain her?
In a cost-utility analysis, what does the incremental cost-effectiveness ratio (ICER) represent?