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Cost-utility analysis (CUA) is a specialized form of cost-effectiveness analysis that measures health outcomes in quality-adjusted life-years (QALYs), combining length of life and quality of life into a single metric. One QALY equals one year lived in perfect health; a year lived with a disability or chronic condition is weighted by a utility value between 0 (death) and 1 (perfect health). QALYs enable comparison across diseases and interventions — a cancer drug that extends life by 2 years at utility 0.6 produces 1.2 QALYs, comparable to a joint replacement that improves quality from 0.5 to 0.9 for 3 years (1.2 QALYs). DALYs (disability-adjusted life-years) invert the metric: they measure years of healthy life lost to disease. Both metrics operationalize the intuition that extending a miserable life is worth less than extending a good one, enabling resource allocation that accounts for quality, not just quantity.
Standard cost-effectiveness analysis can compare interventions for the same disease (two blood pressure drugs measured in mmHg reduction), but it cannot compare across diseases — how do you weigh a mmHg of blood pressure against a percentage of cancer recurrence? QALYs solve this by creating a common currency for health outcomes that combines quantity and quality of life into a single number.
The QALY is calculated by multiplying time in a health state by the utility weight of that state. Utility weights range from 1 (perfect health) to 0 (death), with some states valued below 0 (worse than death — e.g., severe, unremitting pain). A year of perfect health = 1 QALY. A year at utility 0.7 (moderate arthritis) = 0.7 QALYs. Five years at utility 0.5 = 2.5 QALYs. Utilities are measured using standardized instruments: the EQ-5D questionnaire (five dimensions: mobility, self-care, usual activities, pain/discomfort, anxiety/depression, each with 3-5 levels) is the most widely used, with country-specific value sets translating EQ-5D profiles into utility weights.
DALYs approach the same problem from the opposite direction — measuring health lost rather than health gained. One DALY represents one lost year of healthy life. DALYs have two components: Years of Life Lost (YLL) from premature death (comparing actual age at death to a standard life expectancy) and Years Lived with Disability (YLD), weighted by disability severity (ranging from 0 for no disability to 1 for death-equivalent disability). The Global Burden of Disease Study, coordinated by the Institute for Health Metrics and Evaluation, uses DALYs to quantify the health impact of every disease in every country — providing the data foundation for global health priority-setting.
Both metrics have limitations. QALYs assume that a QALY is a QALY regardless of who receives it — one QALY for a 20-year-old is valued the same as one for an 80-year-old, and one QALY for a wealthy person equals one for a poor person. This ignores equity concerns that many societies consider important (some argue QALYs should be weighted by severity or social disadvantage). The utility weights themselves are debatable — they vary by country, elicitation method, and respondent population. And the fundamental assumption that quality and quantity trade off linearly (two years at 0.5 = one year at 1.0) may not match individual preferences. Despite these limitations, QALYs remain the standard outcome measure for health technology assessment worldwide because no better alternative has emerged for cross-disease comparison.