A guest post by Barry Brill:
New Zealand is embarked on a world-leading effort to “totally eradicate the virus”, while other countries have settled for containment or suppression or “flattening the curve”.
It is sobering that no other country has yet chosen to follow our lead. While the Prime Minister's brave endeavour has attracted much international admiration, it may well prove to be the worst policy decision made by any Government in our history.
Eradication requires mind-boggling expenditure of both Government and private sector funds. It will precipitate a devastating economic recession and dole queues not seen since the Great Depression. It requires our borders to remain closed to the world indefinitely and thereby mandates the decimation of our tourism industry.
On a net basis, eradication will cost the lives of many New Zealanders:
“When economies contract, life expectancy declines, due to, among other things, a rise in poverty, violent crime and suicide. During the global financial crisis of 2007– 09, the suicide rate in the United States increased by 4.8% according to the Center for Disease Control and in Europe by 6.5% according to the World Health Organisation. Philip Thomas, professor of risk management at Bristol University, has calculated that if the UK's GDP falls by more than 6.4% per person as a result of the lockdown, more years of life will be lost than saved, using [the Imperial College] estimates.”
This quote is from the UK, where Covid deaths are running at 237 per million – a world away from Southern Hemisphere countries where average deaths to date are less than 5 per million. In the Eastern Hemisphere (New Zealand, Australia, Indonesia, Singapore, Taiwan, Japan) the average is only 2 per million.
What is a QALY?
Most Government expenditure is directed to enlarging the quantity or quality of its citizens' lives.
Although demand for healthcare may be almost infinite, no Government can spend all its resources in one sector. There are also strong and reasonable demands for welfare, policing, education, defence, housing, transport, justice, etc.
So how can all the necessary trade-offs be planned and allocated on a rational basis, rather than by impulse or by powerful people choosing ‘favourites'?
When a choice must be made between spending marginal dollars on either (say) a life-saving traffic barrier or an additional Pharmac medicine, that decision-making process must be both objective and consistent. Similar choices arise in allocating limited healthcare funding as between physical health and mental health.
Throughout most of the world, the solution to these dilemmas is to construct an artifice called a quality-adjusted life-year (QALY) and to assign it a dollar value. This orthodox framework has guided the allocations in Government Budgets for many years.
For New Zealand, the best available QALY proxy is one year's official estimate of national disposable income per capita – which was $52,500 for the 2019 calendar year. So, if a pending coronavirus epidemic would cost us (say) 100,000 QALYs, it would be defensible for the Government to spend up to $5.25 billion to stop that from happening.
If a Government was not prepared to spend that much on quarantines, it could be criticised for undervaluing human life. And if it spent more than that figure it would be just as bad – because we would be losing even more lives (ie quality-adjusted lives) in other areas than were being saved by the universal quarantine (Lockdown).
But has our Government been observing these important disciplines in the Corvid epidemic? Has its unprecedented splurge been proportionate or reckless? Is it pursuing an expensive cure that will prove worse than the disease?
These are crucial questions that are being asked throughout the developed world. They are especially crucial in this country where the Government has debilitated the economy more than in any other country in the world. But they have not so far occupied much of the attention of the legacy media (or the Epidemic Response Committee) in New Zealand.
It has been left to a think tank, the New Zealand Initiative, to enquire whether the Lockdown has been a provable over-reaction. Veteran economist Bryce Wilkinson inputs Covid morbidity and mortality data to the 2017 spreadsheet model constructed by five of New Zealand's leading epidemiologists. His research note is brief and well worth reading in full.
As might be expected, the model's assumptions have many caveats – and Dr Wilkinson clearly has reservations about the model itself. His purpose is “to begin an exploration of trade-offs, not to provide an authoritative valuation”. The key finding from his modelling:
“spending 6.1% of annual GDP might be justified if it saved the 33,600 Covid-19 deaths epidemiologists advised the Ministry of Health could result were the pandemic left “substantially uncontrolled.” Under the lower projection of 12,600 deaths, spending more than 3.7% of annual GDP could be excessive, even if success was assured. “
So, even if the Government was quite sure it could prevent as many as 12,600 deaths from an uncontrolled epidemic, it would not be able to justify spending $11.47 billion (3.7% of $310 billion) to achieve that.
This finding is a bit of a shock. The Government's wage subsidy alone might exceed $12 billion and that is just one of a string of expensive initiatives that have been announced. And there are more to come. Clearly, the Government has already way overspent on its efforts to save 12,600 lives.
Impressing the world
In March, the Minister of Health was advised by the model's authors that 6 modelled scenarios showed an uncontrolled Covid could claim between 7 and 14,400 lives.
The Government did not recognise that the most vulnerable lives (over 70s) have few QALYs left. It did not check the absurd assumptions behind the figures. It apparently preferred the worst case scenario over the most likely scenario – which was close to the 12,600 lives considered by Dr Wilkinson.
Whether the modelling was right or wrong, that formal advice provided Ministers with a clear benchmark of about $12 millionas the upper bound of the range of spending that could be justified. But then the Cabinet took a political decision to zoom right through that benchmark and spend far more. Suddenly, money was no object. Nor was the Bill of Rights.
How did this happen? If the level and duration of coerced restrictions was not based on a careful balancing of QALYs, then what was its basis? Was it perhaps to extend the crisis out towards the September election? We simply don't know.
There was clearly a certain glamour in New Zealand “going where no country had gone before” and being the very first country to totally eliminate a coronavirus. The Prime Minister is well skilled in the politics of drama and the lure of global affirmation.
Did the recurring opportunity for world leadership have a certain ring to it? Was it the draw of political theatre and the opportunity to stride the world stage? Perhaps the Prime Minister glimpsed “her nuclear-free moment” yet again?