Cam Donaldson

Craig Mitton

Mitton

English

Despite denials of politicians and other advisors, trade-offs have already been apparent in many policy decisions addressing the coronavirus disease 2019 pandemic and its social and economic consequences. Here, we illustrate why it is important, from a wellbeing perspective, to recognise such trade-offs, and provide a framework, based on the economic concept of ‘marginal analysis’, for doing so. We illustrate its potential through consideration of optimising the balance between reducing the reproductive rate (R) of the virus and further opening of the economy. The framework accommodates both perspectives in the health-vs-economy debate whereby, depending on where we are within the marginal analysis framework, either health issues are allowed to dominate or, below some threshold of R and/or background level of infection, health and economic considerations can be traded off against each other. Given the inevitability of such trade-offs, the framework exposes crucial questions to be addressed, such as: the critical value of R and/or background infection, above which health considerations predominate, and which may vary from jurisdiction to jurisdiction; and the value of lives forgone resulting from the small increases in R and/or background infection levels that may have to be tolerated as the economy is gradually opened

Donaldson, Cam

Mitton, Craig

ResearchOnline@GCU

Health economics and emergence from COVID-19 lockdown: the great big marginalanalysis?Donaldson, Cam; Mitton, CraigPublished in:Health Economics, Policy and LawDOI:10.1017/S1744133120000304Publication date:2020Document VersionPublisher's PDF, also known as Version of recordLink to publication in ResearchOnlineCitation for published version (Harvard):Donaldson, C & Mitton, C 2020, 'Health economics and emergence from COVID-19 lockdown: the great bigmarginal analysis?', Health Economics, Policy and Law. https://doi.org/10.1017/S1744133120000304General rightsCopyright and moral rights for the publications made accessible in the public portal are retained by the authors and/or other copyright ownersand it is a condition of accessing publications that users recognise and abide by the legal requirements associated with these rights.Take down policyIf you believe that this document breaches copyright please view our takedown policy at https://edshare.gcu.ac.uk/id/eprint/5179 for detailsof how to contact us.Download date: 24. Apr. 2022PERSPECTIVEHealth economics and emergence fromCOVID-19 lockdown: the great big marginal analysisCam Donaldson1* and Craig Mitton21Yunus Centre for Social Business & Health, Glasgow Caledonian University, Cowcaddens Road, Glasgow G4 0BA, UK and2School of Population & Public Health, University of British Columbia, Vancouver, British Columbia, Canada*Corresponding author. Email: cam.donaldson@gcu.ac.uk(Received 16 July 2020; revised 20 July 2020; accepted 31 July 2020)AbstractDespite denials of politicians and other advisors, trade-offs have already been apparent in many policydecisions addressing the coronavirus disease 2019 pandemic and its social and economic consequences.Here, we illustrate why it is important, from a wellbeing perspective, to recognise such trade-offs, andprovide a framework, based on the economic concept of ‘marginal analysis’, for doing so. We illustrateits potential through consideration of optimising the balance between reducing the reproductive rate (R)of the virus and further opening of the economy. The framework accommodates both perspectives inthe health-vs-economy debate whereby, depending on where we are within the marginal analysis frame-work, either health issues are allowed to dominate or, below some threshold of R and/or backgroundlevel of infection, health and economic considerations can be traded off against each other. Giventhe inevitability of such trade-offs, the framework exposes crucial questions to be addressed, such as:the critical value of R and/or background infection, above which health considerations predominate,and which may vary from jurisdiction to jurisdiction; and the value of lives forgone resulting fromthe small increases in R and/or background infection levels that may have to be tolerated as the economyis gradually opened.Key words: COVID-19; lockdown; pandemic1. IntroductionTrade-offs, trade-offs everywhere, but not a health economist in sight. It could be argued that thishas been one of the puzzling things of the coronavirus disease 2019 (COVID-19) pandemic, giventhat resource scarcity and trade-offs are the very lifeblood of economics. Perhaps (health) eco-nomics is not ‘scientific’ enough. Perhaps laying bare the trade-offs being made would not beseen as helpful to politicians who, naturally, do not like to recognise that they exist. However,trade-offs have been palpable at all levels of decision making. The economic stimuli of govern-ments across the globe have traded-off the future against the present and sectors of the economywith each other. Health and social care have been traded off against each other, with investmentsin large (often unused) health care capacity at the expense of services and equipment for peoplein care homes. Within health care, non-COVID-related care has been suspended to accommodateneeds arising from the pandemic; initially for sound clinical reasons relating to do-no-harm, butless so now. From the very start, in many countries, shortages in testing and personal protectiveequipment were apparent, with meaningless large numbers thrown out in attempts to appease thepublic (e.g. the ‘100,000-per-day’ in the UK) and little recognition given to a more-systematic© The Author(s), 2020. Published by Cambridge University Press. This is an Open Access article, distributed under the terms of the CreativeCommons Attribution licence (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted re-use, distribution, and reproductionin any medium, provided the original work is properly cited.Health Economics, Policy and Law (2020), page 1 of 5doi:10.1017/S1744133120000304https://www.cambridge.org/core/terms. https://doi.org/10.1017/S1744133120000304Downloaded from https://www.cambridge.org/core. IP address: 86.169.31.220, on 30 Oct 2020 at 15:49:37, subject to the Cambridge Core terms of use, available atapproach to what might be needed by different groups, from which priorities for access, based onhealth gain for resources expended, could be established.Even economists would recognise that there is a level of pandemic where trade-offs do not mat-ter, or, at least, are so obvious that little analysis is required. This is also because, beyond a particularlevel of R (the reproduction rate for the virus) and background prevalence and incidence, the econ-omy and health considerations go hand-in-hand. Particularly, at certain levels of disease, R must becontrolled. Also, economists can contribute to the more ‘science-like’ modelling work of variousinternational research groups; and, likely, have been doing so. But surely, health economics hasmore to offer as a way of thinking and, thus, in contributing to honest debate about emerging trade-offs once R is controlled and the curve flattened. The trade-offs emerging now are those aroundlockdown. No more so than in the US, where Federal and State governments have often been atloggerheads over the health and economic trade-offs of releasing (and imposing) lockdown, aswell as in the now-numerous other locations, internationally, where local lockdowns have beenimposed. With public health leaders having done their best to flatten the curve in many jurisdic-tions and cases increasing in others, we are now in a new phase where a broader set of questions,and disciplines like health economics, are particularly relevant. This requires a framework whichbrings considerations of health and the economy together and to which (economic) modellingcan contribute. It is necessary because, as indicated, the trade-offs are happening now, but withoutsystematic analysis or public debate. Health economics can facilitate this using a theoretical andwell-established framework known as ‘marginal analysis’.2. Marginal analysisAn economic approach to priority setting simply has to adhere to two key economic concepts;‘opportunity cost’ and ‘the margin’. Opportunity cost refers to having to make choices withinthe constraint of limited resources; certain opportunities will be taken up while others must be for-gone. The benefits associated with forgone opportunities are opportunity costs (Karlsberg Schafferet al., 2016). Thus, when applying such a framework within publicly funded health and social care,we would normally state that a consequence of opportunity cost, and in order to spend a limitedbudget to maximum effect, we need to know the costs and benefits from various health and careactivities (Donaldson et al., 2002). Marginal analysis refers to the fact that assessment of costs andbenefits is best addressed ‘at the margin’. The focus is on the benefit gained from the next unit ofresources, or that lost from having one unit less. Imagine that resources are so scarce that we have tochoose between elective heart and hip surgery programmes – perhaps not such an unrealistic pro-spect, even in parts of the US and in other well-funded health care systems, going forward in theshort-to-medium term. The question is not one of whether to resource one whole programme andnone of the other. Rather, it is one of balance between the two.If marginal benefit (MB) per $/£ spent from, say, an elective heart operation programme isgreater than that for an elective hip replacement, then, all else equal, resources should be takenfrom hips and given to hearts (Olsen and Donaldson, 1998). On the basic economic principle of‘diminishing marginal benefit’, whereby physicians prioritise those with most to gain, MBsfrom hearts will begin to fall as the programme is expanded and those for hips rise, as less-beneficial care is withdrawn, until the two come into alignment, all else equal. Such reallocationwould stop, therefore, at a point of balance, where the MB (relative to marginal cost (MC)) forhearts and hips are equalised. Based on such thinking, marginal analysis frameworks have beendeveloped and applied in several hundred health organisations internationally (Mitton andDonaldson, 2004; Peacock et al., 2006; Tsourapas and Frew, 2011). Indeed, we would also con-tend that such frameworks, and the way of thinking they embody, could have been used in earl-ier stages of the pandemic and even in preparation for it. Unsurprisingly, a ‘great big marginalanalysis’, of the sort currently required and which we now outline, has never, to our knowledge,been undertaken.2 Cam Donaldson and Craig Mittonhttps://www.cambridge.org/core/terms. https://doi.org/10.1017/S1744133120000304Downloaded from https://www.cambridge.org/core. IP address: 86.169.31.220, on 30 Oct 2020 at 15:49:37, subject to the Cambridge Core terms of use, available at3. The great big marginal analysis: emerging from lockdownOften, the thought process behind marginal analysis is better described via a sequence of concep-tual diagrams, which we now do in the context of emerging from lockdown – see Figure 1. Theassumptions, to illustrate, are that we are now in a zone where the background level of infection isstill significant but in which R is less than 1. We are, of course, aware that R differs by subgroups,across time and by location, but this does not deflect from the substance of the argument thattrade-offs with the economy, whether at local, regional or national levels, can be made; and,indeed, are being made. This has often been denied by politicians in many countries, but isnow, further into the pandemic and the associated adverse consequences of lockdown,more-openly discussed. The ‘benefits’ being traded-off refer to some abstract notion of aggregatecommunity well-being. Such benefits can arise from individual and private sector activity, but, inthe current context, is heavily overlain and intertwined with public ‘bads’ and negative external-ities (in the form of communicable disease), and, conversely, with improvements delivered bypublic goods and positive externalities (e.g. future protection). Therefore, given that only collect-ive (i.e. not individual) actions can deliver such public goods and internalise such externalities,the framework is one proposed for use and adaption by government and other public agencies.For purposes of illustration, we are saying that such community benefit can be monetised andso presented on the same scale (or axis) as costs (Figure 1a). Diagrams to the left in Figure 1 illus-trate MCs and benefits of reducing R from 1 to 0 whilst those to the right illustrate the same foropening the economy. In the latter, we include all sectors; public, private and civil society.First, we invoke the above-mentioned notion of diminishing MB, whereby the MBs of redu-cing the R-value from 1 is positive but gradually reduces. Let us say that in the range of R = 0.7–1.0, MB reduces only very gradually (1b), after which, due to it being less critical, a sudden dropoff in MB occurs before it continues on a more-regular downward slope (1c). Accordingly, and tobe clear, as we reduce R, the total benefits are greater and greater, but the increases, in terms ofthe marginal social value of the corresponding health gains, are lesser and lesser. Hence, thedownward sloping MB line for R and, correspondingly, for ‘Opening the economy’ (1c and1d). Of course, we would recognise that, in the latter case, people may debate which sectors,or even which parts of sectors, are more or less valuable, even at the margin. However, evenwithin sectors, we assume that the most-needed parts will be opened first, or, of course, neverclose. To aid presentation, assume the MC of reducing R or economic expansion are constantand equal (1e). The question then becomes, given, on any particular day, a particular startingpoint for each of R and the economy, where do we go from here (1f). From 1 g, it can be seenthat the gap between MB and MC (or the MB/MC ratio) at the chosen starting point for the econ-omy is greater than at the starting point for R. Thus, the economy can expand and R can beallowed to drift upwards as we trade-off the gains from the former against the losses (whichthere will inevitably be) from the latter. Opening of the economy can continue until the MB/MC ratios are equalised. The final diagram (1 h) shows that, when a consequence of any eco-nomic expansion is for R to fall back into 0.7–1.0 range, the marginal gains from any such expan-sion will be too small to justify going past a certain point, beyond which the gains from focussingon R far outweigh those of the economy.4. ConclusionIt is important to reiterate that we are not claiming that the lines in Figure 1 can be measuredaccurately. They are used to represent an important debate currently ensuing throughout theworld as well as a thought process to aid its resolution. It is a thought process which accountsfor the two main perspectives in ongoing ‘health-vs-the-economy’ debates. Depending onwhere we are within the marginal analysis framework, either health issues dominate, only becausethey go hand-in-hand with the economy, or, below some threshold of R and/or background levelHealth Economics, Policy and Law 3https://www.cambridge.org/core/terms. https://doi.org/10.1017/S1744133120000304Downloaded from https://www.cambridge.org/core. IP address: 86.169.31.220, on 30 Oct 2020 at 15:49:37, subject to the Cambridge Core terms of use, available atof infection, health and economic considerations can be, and we would contend are, traded offagainst each other.Moving forward with such a framework has two main implications. The first is that criteria arerequired to reflect what we mean by ‘benefit’ (Peacock et al., 2007). In the current context, thismust be done with respect to reducing R, extent of infection and opening of economies. Manygovernments have defined sets of criteria for each, but have not connected them in oneFigure 1. Great big marginal analysis: the theory.4 Cam Donaldson and Craig Mittonhttps://www.cambridge.org/core/terms. https://doi.org/10.1017/S1744133120000304Downloaded from https://www.cambridge.org/core. IP address: 86.169.31.220, on 30 Oct 2020 at 15:49:37, subject to the Cambridge Core terms of use, available atframework. Second, and relatedly, nor have many governments openly admitted the need fortrade-offs, not only within which lives may be lost but also tolerated. Indeed, it might be arguedthat deliberately not recognising trade-offs then allows avoidance of such uncomfortable truths.Even when below some critical threshold (like 0.7 in our example), a small increase in R willresult in more infections and, as just alluded to, risk to life. Note current international debateson ‘1 m vs 2 m’ on social distancing. Is there an amount of economic expansion which might pro-vide benefits to the population so great by which an upward drift in R, with its consequent risks,would be permitted?Such issues require debate and evidence on at least two key things: the critical range withinwhich concern for R and background infection levels take over any concern even for incrementalopening of the economy, a range which may, of course, vary across jurisdictions; and more expli-cit use of values of health and life which already exist and are used in public policy (Viscusi andAldy, 2003; Donaldson et al., 2011; Baker et al., 2014). The latter are based on asking represen-tative samples of the population about the value they place on small changes in risk (Chiltonet al., 2020). Their use, ultimately, means facing up to the question of the value to be placedon life and health vs opening the economy at the margin, accepting that that value may changeaccording to whether we are above or below a critical value of R. In our view, the trade-offsreferred to in this paper are inevitable and, for purposes of optimising overall human welfare,are better recognised, analysed and publicly debated.ReferencesBaker R, Donaldson C, Mason H and Jones-Lee M (2014) Willingness to pay for health. Encyclopedia of Health Economics3, 495–501.Chilton S, Nielsen JS and Wildman J (2020) Beyond COVID-19: how the dismal science can prepare us for the future.Health Economics 29, 851–853.Donaldson C, Currie G and Mitton C (2002) Cost effectiveness analysis in health care: contraindications. British MedicalJournal 325, 891–894.Donaldson C, Baker R, Mason H, Jones-Lee MW, Lancsar E, Wildman J, Bateman I, Loomes G, Robinson A, Sugden R,Pinto Prades JL, Ryan M, Shackley P and Smith R (2011) The social value of a QALY: raising the bar or barring the raise?BMC Health Services Research 11, 8.Karlsberg Schaffer S, Sussex J, Hughes D and Devlin N (2016) Opportunity costs and local health service spending deci-sions: a qualitative study from Wales. BMC Health Services Research 16, 103.Mitton C and Donaldson C (2004) Priority Setting Toolkit: a Guide to the Use of Economics in Healthcare Decision Making.London: BMJ Publishing Group.Olsen JA and Donaldson C (1998) Helicopters, hearts and hips: using willingness to pay to set priorities for public sectorhealth care programmes. Social Science & Medicine (1982) 46, 1–12.Peacock S, Ruta D, Mitton C, Donaldson C, Bate A and Murtagh M (2006) Using economics for pragmatic and ethicalpriority setting: two checklists for doctors and managers. British Medical Journal 332, 482–485.Peacock S, Richardson J, Carter R and Edwards D (2007) Priority setting in health care using multi-attribute utility theoryand programme budgeting and marginal analysis (PBMA). Social Science & Medicine (1982) 64, 897–910.Tsourapas A and Frew E (2011) Evaluating ‘success’ in programme budgeting and marginal analysis: a literature review.Journal of Health Services Research & Policy 16, 177–183.Viscusi WK and Aldy JE (2003) The value of a statistical life: a critical review of market estimates throughout the world.Journal of Risk and Uncertainty 27, 5–76.Cite this article: Donaldson C, Mitton C (2020). Health economics and emergence from COVID-19 lockdown: the great bigmarginal analysis. Health Economics, Policy and Law 1–5. https://doi.org/10.1017/S1744133120000304Health Economics, Policy and Law 5https://www.cambridge.org/core/terms. https://doi.org/10.1017/S1744133120000304Downloaded from https://www.cambridge.org/core. IP address: 86.169.31.220, on 30 Oct 2020 at 15:49:37, subject to the Cambridge Core terms of use, available at

Health economics and emergence from COVID-19 lockdown: the great big marginal analysis?

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Health economics and emergence from COVID-19 lockdown: the great big marginal analysis?

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