Decisions about medical treatments and the settings of health programs are not purely technical, but also involve issues of value such as the evaluation of trade-offs between quality of life (morbidity) and quantity of life (mortality). The most commonly used measure of outcome in such cases is the quality-adjusted life year (QALY). The authors show that QALYs, being a health status index, do not stem directly from the individual's utility function and thus only partly reflect the individual's true preferences. This might lead to the choice of the nonpreferred alternative due to the misrepresentation of the individual's preferences. Two examples illustrate this claim. An alternative measure of outcome, the healthy-years equiv alent (HYE), is described. This measure stems directly from the individual's utility function and thus fully reflects his/her preferences. It combines outcomes of both morbidity and mortality and thus can serve as common unit of measure for all programs, allowing com parisons across programs. Different ways of measuring the HYE are discussed. Key words: utility theory; economic evaluation; cost-effectiveness analysis. (Med Decis Making 1989;9:142-149)