As a Roadmap to Recovery is released, what can health economics offer decision-making?

Introduction by Croakey: Australia has been presented with two options for the next stage of responding to the pandemic, until a vaccine becomes available: an elimination strategy or a controlled adaptation strategy, although these are not presented as “binary” options but as part of a continuum.

The options are explored in an an independent report by the Group of Eight universities, Roadmap to Recovery.

It was developed by more than a hundred epidemiologists, infectious disease consultants, public health specialists, healthcare professionals, mental health and well-being practitioners, Indigenous scholars, communications and behaviour change experts, ethicists, philosophers, political scientists, economists and business scholars.

The report seeks to present a balanced case for both options, noting that any choice between them entails “a delicate trade-off between protecting health, supporting the economy and societal well-being”.
 
The authors suggest that whatever measures are implemented, they must be compatible with these principles:

• A commitment to democratic accountability and the protection of civil liberties.
• Equal access to healthcare and a social safety net must be provided for all members of the community.
• Renewal and recovery programs should focus on those most affected first. In the long run, they should foster social and economic innovation that will make all
  Australians more resilient in the face of future shocks.
• Strong recovery will require a trusted partnership between governments and civil society, including business, community sector, unions, academia and local communities.

With the report raising questions about trade-offs, it is timely to consider whether economists should be playing a greater role in the health response to the COVID-19 pandemic, as suggested below by Professor Anthony Scott from the Melbourne Institute: Applied Economic and Social Research at the University of Melbourne.

Anthony Scott writes:

In health care, to make any decision without evidence on costs and benefits of alternative courses of action makes it much harder to ensure that population health is as high as it can be.

Any health care decision or policy choice requires trade-offs because resources are always limited. The difficulty of making the trade-offs and choices (that must be made) becomes apparent when they are laid bare, when it is clear precisely who will die or become ill and who will live, including in situations when the choices have direct impacts on people we know.

COVID-19 has brought these trade-offs directly into most people’s lives because of the scale and breadth of the impacts.

The costs of saving lives from the spread of COVID-19 are already very high and will increase further. At the moment there seems to be national consensus that these costs will be worth the lives saved, that we are doing the right thing to save lives.

Belgium is one of the countries with the highest rates of deaths per population (598 per million) in the world as at the 26th April. If Belgium’s death rate was applied to Australia, we would have had over 14,850 deaths rather than the current number of 83.

There are of course many reasons why our death rate is much lower, and why the two countries are not directly comparable, but this gives a very rough idea as to how bad it could have been if policies were introduced too late, with the number much higher if nothing was done at all.

Sixty-two percent of Australians think the government is doing the right thing, and this increased to 69.3 percent one week later.

But when will Australians become frustrated with the cumulative effects of social and economic hardship?

As deaths and cases are falling close to zero, people will demand restrictions to be lifted.

In addition to saving lives from reducing COVID-19, there will be reductions in reduced health and quality of life and potential increase in deaths from people not allowed to go, and not wanting to go to hospital for other conditions, the adverse effects on health and mental health of social isolation, job losses, increased financial pressure on the vulnerable and poor families that have to work to put food on the table, and the recession that will come and have long lasting effects. These are real and matter and need to be measured.

The fiscal cost of the unprecedented economic stimulus package is designed to help ameliorate the adverse effects of social distancing and job losses. We are fortunate that we are rich country that can afford this. Other countries are less fortunate.

Only time will tell whether the stimulus package was worthwhile in terms of its impact on economic and social wellbeing.

Considering externalities

A particular issue with the trade-offs individuals need to make to stop the spread has been how the seemingly usual behaviours of individuals can directly harm others.

In economics, we refer to these effects on others as ‘externalities’. These are where the sometimes self-interested actions of some, even just going about their usually day-to-day business in the case of COVID-19, can at worst cause loss of life.

There is no greater example of these externalities, taught in most health economics 101 classes, than infectious diseases such as COVID-19. The success of social distancing directly depends on people understanding these externalities, elevating other’s lives above their own immediate private interests, and accepting the adverse effects of social and economic hardship that will extend for years into the future.

The Melbourne Institute survey shows that almost 76 percent of Australians think that most people or everyone in their neighbourhood is practicing social distancing, rising slightly to 78 percent one week later.

But this also means that around one in four report that some, few or no-one is doing this.

To save the lives of thousands of people we may or may not know, is the social and economic hardship worth it? This is the trade-off that many Australians are grappling with.

Economics applied to healthcare is usually unpopular amongst doctors and decision makers partly because it brings such choices and trade-offs into sharp focus. No-one likes making these choices.

Many don’t like the suggestions of economists who seemingly are delivering messages of doom and gloom (‘the dismal science’) rather than the hope that people crave and politicians need to deliver.

Making choices in healthcare is inevitable but are always incredibly tough, involving life and death, and dealing with raw emotions of fear and hope that go hand-in-hand with moral and ethical dilemmas.

These issues often mean that any ‘rational’ cost-benefit calculus is unethical or distasteful, and relegated to an afterthought.

However, making a choice not to account for economics and opportunity costs can lead to lower population health, likely causing death and harm.

Opportunity costs

Health economics tries and tries, with more failures than successes, to ensure that policy decisions and clinical decisions takes proper account of opportunity costs so that the population’s health and wellbeing can be as high possible.

But to do this requires hard trade-offs and our messages are often misinterpreted and not always welcome.

Nevertheless, even if thousands of lives are being saved, we still need to be able to assess the full impact of the lockdowns on all aspects of people’s lives to better understand how to support them, and devise cost-effective policy responses for the next time this happens.

It has always been difficult for economists to be involved from the outset in health care decision making.

This seems to have been the case in the government’s management of COVID-19, where in the Departments of Health across the country there are Chief Medical/Health Officers but no Chief Economists, and no national economics committee supporting the epidemiological modelling that focuses only on the lives saved from preventing the spread of COVID-19 and not on the far-reaching adverse effects of such policies on the many other aspects of people’s lives that they value.

It is important to highlight that bringing economics into this should not be about supporting big business and sharemarkets over population health.

But it is about ensuring that, overall, the health status and broader well-being and quality of life of the population is paramount in a world confronted with very tough choices that no-one likes to make.