In health economics, a quality-adjusted life-year (QALY) is a generic measure of the burden of disease, capturing both the quality and the quantity of life lived. It is used in economic evaluation of treatment to assess the value of medical interventions, and QALYs assess the effect of a given treatment on how long a patient will live multiplied by their quality of life in those remaining years with that treatment. Hence, one QALY equates to one year lived in perfect health.
According to the National Institute for Health and Care Excellence (NICE), a so-called QUANGO that provides guidelines to public health authorities in the UK, a cost of £20,000 per QALY gained is generally considered as cost effective. This cost allowance is consistent across diseases and treatments and should be valid even if we find ourselves in extraordinary circumstances – and right now, that’s exactly what we do: the UK, along with the rest of the world, is in an unprecedented fight against a global pandemic – but we should still ask the question: is the cost of the economic disruption coming from the government’s handling of the Coronavirus crisis consistent with standard policy in public healthcare in the UK?
To answer this, we must determine two indeterminable quantities: the cost of the measures over and above the cost of doing nothing (or doing something else) and the number of QALYs gained. The first, in particular, is impossible to calculate, for a number of reasons: we don’t know when the crisis will end, we don’t have a comprehensive method of determining the cost of the measures as we go along and we can’t estimate confidently how it contributes to long-term economic performance – and we have an even worse problem with the scenario we are comparing to, as determining those same things for a hypothetical scenario (non-intervention for example) is an even more impossible task.
But what we can say is that for every billion pounds spent, in order to be aligned with the NICE guidelines, 50,000 QALYs must be gained. Because the fatality of Covid-19 is massively skewed towards the frail, the elderly and those with an underlying medical condition, some estimate that up to two thirds of people who succumb to the disease would have died anyway within a year. But a significant number of those who are saved must be expected to gain at least some QALYs – so for the sake of argument, let’s say that the average QALY gained per life saved is 5, which means 10,000 lives must be saved to justify each additional billion pounds of expense.
So, what will it cost? It is difficult to assess even the running cost of each of the many government initiatives, but taking just one, the Coronavirus Job Retention Scheme (CJRS), we can try to get some idea. The scheme has been estimated to cost the government £10 billion over three months even if just 10% of employees were affected, but not all of this would be a direct cost of the scheme, as for sure many of those jobs would have been dormant (either made redundant or sent home on leave) in absence of the emergency scheme and the affected would have signed up for universal credit (which is however much less generous) or been paid to do nothing by their employer. But with the higher amounts available under the CJRS and the built-in incentive for businesses to make use of the scheme in situations where they may otherwise have continued to ask their employees to work, and remembering that the £10 billion price tag is if only 10% of workers are affected, almost certainly an underestimation, let’s say that we attribute a cost of £1bn a month to the scheme compared to doing nothing and keeping all other policy initiatives unchanged. That means this scheme alone must save 30,000 lives over three months, using our average QALY saved estimate of 5 years.
Of course, the CJRS is far from the only element of the government’s plan to fight Coronavirus. There’s a £330 billion loan scheme to struggling businesses (how much of this will be lost as those businesses fail and can’t pay their loans back?), a scheme to pay the self-employed, direct government grants for businesses and of course the huge bill to undertake the actual fight against the virus and save those lives that are going to yield the QALYs that justify the spending. And last, but definitely not least, there’s the unknown cost to society of wealth lost as schools and businesses close and the public is on lockdown and cease to produce – and those losses will continue as we find ourselves in a deep recession when we emerge on the other side of the epidemic. So, while acknowledging that there would be very serious economic consequences regardless of what approach the government took to the crisis, it is not unfair to say that the additional cost of the extreme measures adopted will run into many billions a month. Will we gain enough QALYs to justify that cost? You’re not going too far out on a limb if you answer in the negative. Imperial College London, which advices the government, estimated that if nothing was done, in the worst case 510,000 lives would be lost, whereas with the extreme measures adopted that could be reduced to 20,000. Under our assumptions, that would justify spending at most about £50 billion, equivalent to about £750 per person in the UK (note that the Imperial College scientists are among those who have made the most pessimistic forecasts of the potential consequences of Coronavirus).
This speaks nothing of the cost to our civil liberties or the ramifications around an inter-linked world, where our drop in consumption means hardship for our trading partners around the globe, but neither is the above in any way intended as providing definitive evidence that the fight may not be worth it economically. As stated in the beginning, we don’t know what the cost will be, and we don’t know how many QALYs will be gained by the government’s initiatives. A day will surely come when academics will attempt to do that calculation, but for now, the important thing is to contextualise the enormous cost of the economic shutdown and the government takeover of the economy. Societies, those with socialised healthcare systems in particular, weigh health benefits against economic cost as an integral part of how the system works. But no such calculation is being made in the Coronavirus crisis. That may be partly because things move too fast, but no one should be in any doubt that political calculation and catering to the opinions of an ill-informed and frightened public, rather than economic analysis, provide the basis for most of the policy decision made by government in these strange days.