What it means
Money is not the only measure of a good life. Two people on the same income can have very different levels of wellbeing depending on their health, housing, time with family and sense of safety.
Quality of life tries to capture all of this. In business, the idea appears in several places.
Employers consider staff wellbeing when designing benefits and working patterns. Governments weigh it when they decide how to spend limited budgets, and insurers and health bodies use it to judge whether a treatment is worth its cost.
The quality-adjusted life year, or QALY, is the best known measure. A year of perfect health counts as 1.0, and a year in poorer health counts as less, for example 0.5.
Multiplying years by the quality score gives total QALYs, which allows different treatments to be compared on one scale. Cost-effectiveness is then measured as the extra cost per extra QALY gained.
Health systems often set a threshold, and treatments below it are considered good value. These thresholds are policy decisions, vary between countries and are debated.
The measures have limits. Scoring quality is subjective, different groups may value outcomes differently, and averages can hide the effect on individuals.
Quality of life should therefore be used alongside, not instead of, other evidence and common sense. Retirement planners use a simpler version of the same idea.
They ask not only how much money a client will have but what kind of life it can support, such as housing, travel, care and time with family. A plan that maximises wealth but ignores quality of life may not deliver what the client really wants.
In practice
Real-world examples.
Example
A hospital board compares two treatments for a chronic condition. It uses cost per QALY to decide which gives the greater benefit for the budget available.
Example
A company introduces flexible working and a wellbeing allowance. Its HR director tracks staff surveys and turnover to show that the changes improved quality of life and reduced hiring costs.
Example
A financial planner asks a retiring client to describe what a good day looks like. The answers shape a plan that spends more on travel in the early years and less on a large house. Her report records which parts of the client's plan protect health, family time and independence, as well as the budget. She revisits the plan each year, because a person's priorities can change as health and family circumstances change.
Formula
Calculation
QALYs = years lived x quality score (between 0 and 1)
Cost per QALY gained = extra cost / extra QALYs
Suppose standard care gives six years at a quality score of 0.5, which is 6 x 0.5 = 3.0 QALYs. A new treatment gives six years at 0.75, which is 6 x 0.75 = 4.5 QALYs, and costs $75,000 more. The extra QALYs are 4.5 - 3.0 = 1.5. The cost per QALY gained is 75,000 / 1.5 = $50,000.Case study
Seen in the real world.
Greenhaven Health Fund is an illustrative, fictional insurer that had to decide whether to cover a new therapy costing $60,000 per patient. The therapy was expected to improve a patient's quality score from 0.60 to 0.80 over five years.
The gain in QALYs was 5 x (0.80 - 0.60) = 1.0 per patient. The cost per QALY was therefore 60,000 / 1.0 = $60,000.
The fund's committee compared this with its internal threshold and with other treatments it already funded. In the illustrative result, it approved the therapy for a narrower group of patients who would gain the most, and agreed to review the evidence after two years. The committee also asked a patient group to describe which outcomes mattered most, because the scores alone did not show whether mobility, pain or independence was the main gain. That feedback shaped the criteria used to select patients and the way the results were reported. Two years later the fund compared actual outcomes with the forecast gain and found patients had reported slightly lower scores than predicted. It adjusted the criteria for future patients and shared the results with the manufacturer.
Watch out
Common mistakes.
- Treating quality scores as exact facts, when they rest on surveys and judgements.
- Using income as the only measure of wellbeing, when health, time and security also matter.
- Applying one threshold across every situation without considering the people affected.
Questions
People also ask.
What is a QALY?
It is one year of life adjusted for quality, where 1.0 is perfect health and lower numbers reflect poorer health.
Who uses quality of life measures?
Health systems, insurers, governments, employers and financial planners all use versions of them.
Can quality of life be measured in dollars?
Sometimes through willingness-to-pay studies, but the results are debated and should be handled carefully.
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