A QALY, or Quality-Adjusted Life Year, is a measure used in health economics to assess the value of medical interventions. It combines the quantity and quality of life gained from a treatment. One QALY equates to one year of life in perfect health, while less than perfect health is represented as a fraction of a year. QALYs help policymakers and healthcare providers make informed decisions about resource allocation. By comparing the cost-effectiveness of different treatments, they can prioritize interventions that provide the greatest health benefits relative to their costs, ultimately improving patient outcomes and optimizing healthcare spending.