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Healthcare Economics

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Economics
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University of Nairobi
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Economics of Health and Health Care
Student's Name:
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Professor's Name:
Course:
Date:

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Question One
QALY is Quality-Adjusted Life-years. It is applied in health economics to quantify and compare
the health care intervention and assist in allocating healthcare resources. It uses the theory of
Cost-Utility Analysis (CUA) and Cost-effectiveness Analysis (CBA) to estimate the state of
health of a person. Therefore, one QALY insinuates perfect health, while a QALY of less than
one represents poor health (Sherman et al., 2017). Thus QALY is calculated by multiplying the
utility and the estimated life years.
The incremental cost-effectiveness ratio is calculated by dividing the incremental cost of medical
intervention by the incremental outcome (QALY)
1. QALY(at baseline)= 3*0.8
=2.4QALYs
QALY (Therapy A) = (1*0.7) + (4*0.9)
= 4.3QALYs
Incremental QALYs= QALY (Therapy A) QALY (at baseline)
= 4.3-2.4
=1.9QALYs
Incremental Cost= Cost of therapy A- Cost at baseline
= 100,000-0
=$100,000
Therefore, ratio Therapy A: baseline = Incremental cost/Incremental QALY
= 100,000/1.9
=$52,631.58 per QALY
2. QALY (Therapy B) = (1*0.6) + (6*0.9)

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1 Economics of Health and Health Care Student's Name: Institution Affiliation: Professor's Name: Course: Date: 2 Question One QALY is Quality-Adjusted Life-years. It is applied in health economics to quantify and compare the health care intervention and assist in allocating healthcare resources. It uses the theory of Cost-Utility Analysis (CUA) and Cost-effectiveness Analysis (CBA) to estimate the state of health of a person. Therefore, one QALY insinuates perfect health, while a QALY of less than one represents poor health (Sherman et al., 2017). Thus QALY is calculated by multiplying the utility and the estimated life years. The incremental cost-effectiveness ratio is calculated by dividing the incremental cost of medical intervention by the incremental outcome (QALY) 1. QALY(at baseline)= 3*0.8 =2.4QALYs QALY (Therapy A) = (1*0.7) + (4*0.9) = 4.3QALYs Incremental QALYs= QALY (Therapy A) – QALY (at baseline) = 4.3-2.4 =1.9QALYs Incremental Cost= Cost of therapy A- Cost at baseline = 100,000-0 =$100,000 Therefore, ratio Therapy A: baseline = Incremental cost/Incremental QALY = 100,000/1.9 =$52,631.58 per QALY 2. QALY (Therapy B) = (1*0.6) + (6*0.9) 3 = 6QALYs Incremental QALY = 6-2.4 =3.6QALYs Incremental Cost= Cost of therapy B-Cost at baseline = 300,000-0 = $300,000 Therefore, ratio therapy B: Baseline= 300,000/3.6 = $83,333.33 per QALY The ratio of Therapy B: A = (300,000-100,000)-(6-4.3) = 200,000/1.7 = $117,647.06 per QALY A doctor will be more concerned wit ...
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