Question

1. Dan has a rare form of lung cancer. A new medical treatment is found that would treat Dan's cancer, and although it would not cure it, research indicates that it would likely extend dan’s life by two years allowing him to have a quality of life similar to what it was before he had cancer. After two years, Dan is most likely to see a rapid decline in his health and die within a few months. The cost of this treatment would be $89,000 dollars. whether or not this treatment is likely to be covered by dan’s insurance company and explain why. Hint: QALY

Answer 1

The Quality-Adjusted Life Year (QALY) is a measure of the value and benefit of health outcomes.

Health is defined as a function of two components:

1. Length of life - i.e. mortality

2. Quality of life - i.e. morbidity

The QALY is an attempt to combine these two attributes into a single figure/number^[1].

QALY gives an idea of how many extra months or years of life of a reasonable quality a person might gain as a result of treatment,

To calculate the QALY, the following formula can be used; this assumes a utility value (quality of life) between 1 = perfect health and 0 = dead.

This results in the following:

1. If an individual has perfect health for a period of 1 year, they will be said to have 1 QALY.

i.e. 1 Year of Life x 1 Utility Value = 1 QALY

2. If an individual lives in perfect health but only for half a year, that individual will have 0.5 QALY.

i.e. 0.5 Years of Life x 1 Utility Value = 0.5 QALY

3. If an individual lives for 1 year in a situation with 0.5 utility (half of perfect health) that individual will have 0.5 QALY

i.e. 1 Year of Life x 0.5 Utility Value = 0.5 QALY

In the above case Mr Dan QALY is as follows :

Number of Quality Adjusted Life Years completed * 1 Utility Value

2 years * 1 utility value(prefect helath) = 2 QALY

Hence the insurance Company can cover health insurance to extent of $ 89000. Then Mr Dan can live for 2 years with perfect health. Insurance company will have to give insurance coverage $ 44500 per year to Mr Dan.