The novel coronavirus is disrupting every dimension of American society. Schools are closed. Businesses are struggling to stay afloat. Airlines, hotels, bars and restaurants are virtually empty. Sporting events are cancelled. Groups larger than 50 are discouraged, the financial markets are rattled, and the health system faces an uncharted future.
Social distancing is the new norm: for at least the next 8 weeks, the American way of life will be interrupted with ripple effects that linger long-after especially in the healthcare industry
Is this coronavirus pandemic a Black Swan that caught most by surprise or is it a gray rhino that lurked obviously but was ignored? It’s a legitimate question. In my view, it’s a gray rhino. Here’s why:
Virologists, epidemiologists and infectious disease professionals been studying coronaviruses since 1965. The novel coronavirus (Covid-19) we’re dealing with now is unlike any we’ve seen previously.
It was first discovered in China in 2019. It is caused by a new type of coronavirus, SARS-CoV-2 for which its properties differ from the most recent coronavirus outbreaks (severe acute respiratory syndrome-coronavirus (SARS) outbreak in 2003 and Middle East respiratory syndrome-coronavirus (MERS-CoV) in 2012). It’s more lethal than others. It does not dissipate in warmer weather nor attack susceptible youth. There is no vaccine and no medicine to treat it.
Per the CDC, “On January 30, 2020, the International Health Regulations Emergency Committee of the World Health Organization (WHO) declared the outbreak a “public health emergency of international concern.” On January 31, Health and Human Services Secretary Alex M. Azar II declared a public health emergency for the United States to aid the nation’s healthcare community in responding to COVID-19. On March 11, WHO characterized COVID-19 as a pandemic. On March 13, the President of the United States declared the COVID-19 outbreak a national emergency.”
As of today, the coronavirus is responsible for almost 170,000 confirmed cases worldwide and 6,513 deaths. In the U.S., there are 3774 confirmed cases in 49 states and 69 deaths.
THE GRAY RHINO: LURKING AND OBVIOUS
Pandemics are regular and to some extent predictable. They originate from an animal or human source, spread quickly and globally, and fast-action is necessary to reduce their impact.
The most infamous, severe acute respiratory syndrome aka SARS circa 2002–2003 started in southern China and spread to 29 countries including the U.S. with exponential speed. Since then, four new human coronaviruses have been identified including one, HCoV-NH that originated in New Haven, CT.
What’s clear from prior pandemics is that quick action is necessary to contain the spread and mitigate longer-term adverse outcomes. The fast and dramatic actions taken in China, Taiwan were successful: mass quarantines and lockdowns, significant limits on gatherings and mass testing proved effective.
By contrast, the U.S. response to date has been slow. The White House Coronavirus Task Force was appointed January 29—almost a month after the WHO declared the global emergency. The availability of tests and test sites has been problematic: 1 million kits were promised by last Friday but only 2000 tests were being done by the end of last week the onboarding testing sites was still in catch-up mode. Even as late as last year, administration officials were pursuing a deal to acquire a German vaccine maker, CureVac, but preparedness for the pandemic has been lackluster, especially in coordination efforts with state and local public health officials, hospitals and medical professionals, business leaders and health insurers.
Critics point to May, 2018 as a tipping point. The entire global health security unit developed in response to the 2014 Ebola pandemic in the National Security Council was suspended by the administration. Further complicating matters, technical support from Center for Medicare and Medicaid Services (CMS) and coordination between the US Department of Health and Human Services (HHS) and other federal agencies has been problematic. That’s where we are.
The lack of U.S. preparedness for this coronavirus pandemic is the result of systemic flaws in the U.S. health system.
Inadequate Funding for Public Health
Public health is 2% ($7.3 billion) of total federal spending for healthcare. State and local funding accounts for 58-75% of total funding lending to widespread differences in funding, approaches and program priorities across states and municipalities. After inflation, total funding for public health has decreased 10% in the last decade, 55,000 workers have been cut from payrolls while new epidemics, like opioid addiction took their toll. The ROI for public health is 14:1, but politically public health is not a high priority to elected officials, not as lucrative to investors and not a concern to consumers/voters until and unless their lives are disrupted.
Lack of Integration of Public Health and Local Delivery Systems
90% of hospitals and 95% of medical professionals focus on diagnosing and delivering patient care in a local community. The notion of a global pandemic is ‘out of sight, out of mind’: until four weeks ago, more attention was given to opioid addiction, interoperability and mass consolidation than the existential threat of the novel coronavirus.
In most communities, public health agencies operate at arms -length from local hospitals and practices. But they’re co-dependent. The coronavirus will overwhelm hospitals and clinics: estimates range from 1 million to 5 million will require hospital care at a cost of $30 billion to $90 billion. Some of that might be reimbursed; some will become bad debt. In the meantime, the frontline health professionals and first responders will be sicker and revenues from elective procedures (est. $30 billion) will be lost.
Business Risks for Insurers
It is estimated more than 50 million Americans covered by Medicare, Medicaid, employer and individual insurance will file claims as a result of the coronavirus. Current federal plans to wave co-payments for coronavirus testing in tandem with emergency funding for businesses and individuals to make ends meet is unlikely to mitigate the enormous, unanticipated costs to insurers, and might put providers at risk if they’re not reimbursed in a timely way.
Currently, insurers have pledged to waive co-payments for testing but they’re not obligating themselves to waivers for hospital and clinician services. That remains a big unknown potentially sparking enrollee discontent about surprise medical bills and unanticipated out-of-pocket spending.
Each of these can be remedied. But they’re co-dependent. Like public health as a whole, they must be approached holistically with fresh thinking and thoughtful solutions.
Some have said the novel coronavirus is a black swan completely unexpected and quite disruptive. I disagree. It’s the gray rhino that’s been lurking in the background while the attention of the health system focused elsewhere.
NOVEL CORONAVIRUS FACT FILE: AS OF 3/15/20
Global: 169,387 cases of COVID-19 and 6,513 deaths (Johns Hopkins)
U.S.: 3774 confirmed cases in 49 states and 69 deaths. (Johns Hopkins)
RO/Infectiousness Impact: Covid-19 (2.5), Mumps (4.5), Measles (12-18), Influenza (1.5), SARS (3.5), MERS (.8) Ebola (2.0) a basic measure to track the infectiousness of a disease is the reproduction number aka “R0” or “R naught.” The number tells how many susceptible people, on average, each sick person will in turn infect:
Clinical Research: Johns Hopkins researchers estimate those exposed to the disease will develop symptoms within 11.5 days of exposure and its incubation period is 5 days.
Hospital Capacity: The U.S. has 2.8 hospital beds per 1,000 people vs. 12/1000 in South Korea and Japan, China 4.3/ 1,000). With a population of 330 million, this is about 1 million hospital beds. At any given time, about 68% are occupied leaving about 300,000 beds available nationwide. Assuming 15% of confirmed cases require hospitalization and 5% of these require critical care (a la China) vs. Italy wherein 10% require ICU treatment
Masks: Current U.S. stockpile of 12 million N95 masks and 30 million surgical masks for a health care workforce of 18 million. 6 million work on any given day which means the national N95 stockpile will be exhausted in two days. Note: it’s likely the supply of ventilators, extracorporeal membrane oxygenation devices, saline drip bags et al will also be exhausted before the disease is in check.
Monetary Policy in Response to Coronavirus: March 3, the Federal Reserve made an emergency interest rate cut and last week issued a $1.5 trillion backstop to banks meant to boost Treasury market liquidity. The Fed also announced additional emergency rate cuts yesterday afternoon. Futures were sharply down after the announcement on Sunday, pointing to an implied market halt at the open today, which played out as forecasted.
Long-term impact on the U.S. Economy: Per JP Morgan, the pandemic will reduce the 1Q20 GDP growth from 2.2% by at least .5 to 1.0% and might eliminate GDP growth in 2Q20. According to the OECD, the coronavirus will reduce global output by $2.7 trillion putting countries like Italy and Spain at risk of insolvency.
Public Opinion: A September 2018 poll of U.S. voters found that 89% of respondents believed that public health plays an important role in the health of their community. A majority of voters (57%) were willing to pay higher taxes to ensure that everyone has access to basic public heath protections.
Recent/Current Pandemics (Deaths): HIV/AIDS 1981-present (32 million), Novel Coronavirus/COVID-19 2019-present (4,700), MERS 2015-present (850), Ebola 2014-16 (11,300), Swine Flu/H1N1 2004-06 (575,000), SARS (770).
Gray Rhino: A metaphor for a highly likely yet ignored threat, coined by coined Michele Wucker, author of Ignore. She wrote “It’s a metaphor for the fact that so many of the things that go wrong in business, in policy, and in our personal lives are actually avoidable. We don’t pay enough attention to the big obvious problems that are in front of us.”
Black Swan: A metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight.
Pandemic: “A pandemic is a global outbreak of disease. Pandemics happen when a new virus emerges to infect people and can spread between people sustainably. Because there is little to no pre-existing immunity against the new virus, it spreads worldwide.”
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World Health Organization https://www.who.int/news-room/q-a-detail/q-a-coronaviruses
Centers for Disease Control and Prevention; https://www.cdc.gov/coronavirus/2019-ncov/index.html