BMJ 1992;305:1205-9 In our two previous papers we discussed the use of measures of health related quality of life in clinical trials and in describing the health of populations.12 We now turn to the difficult issue of using quality of life measures for allocating limited resources among com? peting health care programmes. We concentrate on the quality adjusted life year (QALYs) since this approach has received most attention. QALYs use an index combining changes in survival and quality of life of patients (and possibly others) to assess benefit brought about by the funded programme. For each programme this benefit can be divided by its economic cost and the resulting ratio used to help allocate resources. QALYs can be used to choose between alternative programmes for treating the same patients or, more controversially, to choose among programmes targeted at different groups. The underlying philosophy is that rationing of resources is inevitable and so it is best that it is explicit and accountable.3 To ration effectively some measures of output from health care must be established. However, it is important to distinguish between such general issues, with which most may agree, and the actual techniques used in published studies, which have been greatly criticised. For example, Williams describes a method to assess current life expectancy and quality of life in which quality of life is assigned a value q on a 0 to 1 scale, 1 representing perfect health and 0 representing death.4 Each future year is then counted as worth q, with the possibility of discounting the value of future years in a similar manner to that used for future costs. The total QALYs for the group are estimated with and without the intervention, and the difference between the two estimates is a single composite measure of the marginal output of the programme. Williams emphasised the possible role of QALY analysis in the marginal allocation of additional resources, and North Western Regional Health Authority made an early unsuccessful attempt at allocating its discretionary specialties revenue reserve fund to its district health authorities.5 However, dis? trict health authorities are now considering such schemes6 at a more basic level, and in at least one case serious attempts are being made at implementation.7 In this article we focus on British applications, although the most extreme example of a QALY type analysis is that attempted in Oregon.8 Here 714 condition treat? ment pairs were placed in rank order and Oregon proposed to fund them from the Medicaid budget according to those ranks; the future of this project is now, however, in doubt. The QALY analyses arouse strong opinions. Critics have questioned the assumptions underlying the pro? cedure, doubted the quality of the data for calcula? tions, raised ethical objections concerning equity, and questioned whose values were relevant and whether it is reasonable to compare different numbers of different groups of people by a single index.914 Supporters of the QALY approach have said that current examples of QALY analysis are not definitive, that the method is still in development, and that it is intended only as an aid to decision making rather than a strict recipe.1517 The lack of an alternative procedure has also been emphasised.16 To clarify the arguments below we identify the stages necessary to introduce a QALY system for resource allocation. We discuss whether progress from stage to stage is technically feasible or ethically desir? able, and conclude with some recommendations for the appropriate future role of QALY type analyses.