Quality-adjusted life year measures (QALYs) have been fervently debated by researchers and decision makers concerned with resource allocation in the health care sector. They have been heralded as important aids to planning and priority setting, but also criticised on technical and ethical grounds. This paper examines these arguments with special reference to mental health care, the intention being to highlight the strengths and shortcomings of QALYs in this context. Issues pertinent to the application of QALYs in health care evaluation more generally are also reviewed. Whilst the rationale and underlying principles of the utility measurement approach are sound, the generic QALY as it is currently constructed represents an insensitive measure of the outcomes of mental health care. In the event of an increasingly QALY-driven priority-setting environment, however, abandonment of QALYs runs the risk of inappropriately marginalising people with mental illnesses in the resource allocation process. This opens up the possibility of developing a mental-health specific measure of utility that, in combination with cost data, would provide useful and appropriate summary information across treatments and programmes of mental health care.