A woman waits in front of a closed and shuttered storefront amid the COVID-19 outbreak in Lynn, Massachusetts, May 4, 2020, photo by Brian Snyder/Reuters

q&a

Reopening America—The Health and Economic Trade-Offs: Q&A with RAND Experts

A woman waits in front of a closed and shuttered storefront amid the COVID-19 outbreak in Lynn, Massachusetts, May 4, 2020

Photo by Brian Snyder/Reuters

May 4, 2020

After weeks of stay-at-home orders, at least 10 states began Friday to relax the measures that closed public spaces, schools, restaurants, and other businesses. In states where the strictest measures remain, some governors came under pressure from protesters to reopen their economies.

Knowing that more than 1 million people in the United States have contracted COVID-19, and at least 30 million have been thrown out of work by policies to slow the spread of the virus, local and state officials have to figure out the path forward. We asked three RAND researchers about this complex problem:

  • Courtney Gidengil is director of RAND's Boston office, a senior physician policy researcher at RAND, and a specialist in infectious diseases at Boston Children's Hospital.
  • Aaron Strong is an applied microeconomist at RAND and a professor at Pardee RAND Graduate School who worked on a new COVID-19 decision support tool for policymakers.
  • Anita Chandra is vice president and director of RAND Social and Economic Well-Being and a public health researcher.

During a conference call with RAND media relations director Jeffrey Hiday May 1, they discussed

  • the new RAND tool that models the health and economic effects of relaxing or tightening social-distancing restrictions state-by-state
  • why thinking of health and economics as a trade-off can be counterproductive
  • testing, contract tracing, and quarantine examples from other countries
  • how business distinctions could be more nuanced than “essential vs. nonessential” to take into account high- and low-risk jobs and industries
  • that the financial and medical parts of the crisis cannot be separated—and indeed, that policies need to try to “flatten the curve” across a number of dimensions.

An edited transcript of the conversation follows.

RAND has at least 20 research projects underway on COVID-19, including a new online tool that compares potential outcomes on the state level as restrictions are lifted. Anita, how did that project come about, and what is it trying to accomplish?

Anita Chandra: Early in the pandemic, we realized that there were going to be some tough choices in terms of reopening communities and the economy.

This new tool is intended to help state and local officials estimate what will happen if they relax interventions such as social distancing, closing businesses, closing schools, and the like. It blends health and economic information so you can see public health measures like disease transmission, fatalities, and hospitalizations—but also the effect on gross state income.

So this tool will be updated as new data comes in?

Chandra: Absolutely. We are able to take in real-time data from the current pandemic so that decisionmakers have up-to-date estimates on both public health and economic results as they choose to maintain or relax certain measures. That's really the value of this particular tool.

Aaron, on the economic side of this, what have you seen coming out of this research?

Aaron Strong: Social distancing and interventions like that are having vastly different effects on states depending on the composition of their economies. Those hit with disproportionate economic costs are focused much more on agriculture and food processing. Where economies are more diverse—like in New York and California—these interventions are less costly. I was not expecting there to be such a great difference.

We built a model of the economy of every state and calibrated them using historic data. Then we could alter those economies based on different policies and see how the disruptions flow through the supply chain to cause further disruptions week after week. In Alaska, for instance, the decline in output or decline in income was about 9 percent. For some of the more extreme social-distancing policies in a place like Indiana, it's more like 45 percent.

What qualifies as extreme social distancing?

Strong: We looked at five separate non-pharmaceutical interventions: closing schools; closing restaurants and bars to dine-in service and banning large events; closing non-essential businesses, and allowing those who can work remotely to do so; the quarantine of vulnerable populations; and the quarantine of everyone except essential workers. The most extreme would combine all five of those.

Does the research suggest that states should or should not deploy those kinds of extreme measures?

Strong: Each state or locality will have to make local decisions. The tool simply displays what the likely impacts will be—both epidemiologically and economically—of changing these policies. In Wisconsin, Indiana, or Iowa, where these interventions are very costly in terms of the economic side, maybe they want to open up earlier. In places that may have higher epidemiological impacts, maybe it's better to open up later.

Chandra: The tool offers a graduated way of looking at interventions—from the most strict, restrictive policies all the way down to the more relaxed. So if a state goes from Level 5 (very strict) to Level 2 (closing schools, restaurants, and events), you can see what potentially positive effects that will have on the economy but also concurrently how it might increase cases and hospitalizations. The state can start to look at different dates to change the policies and see what they can benefit from in terms of economic rebound, but also, fewer cases or fewer hospitalizations.

From a medical perspective, what's your impression of the business reopenings that are occurring as we speak?

Courtney Gidengil: This is still a very rapidly evolving pandemic, and we have less information than we wish we had. But what's helpful about the models that Anita and Aaron have been talking about is that states can take local factors into account. So a state may not have many cases—but their availability of hospital beds also might be quite low. That's a very different situation from a state that has more cases but also proportionally more hospital beds.

We have to be very thoughtful about these contexts. Let's say a state reopens too early and we see more fatalities as a consequence—and ultimately a harder hit on the economy. To understand why that happened, we have to know what is unique about that state's context if we want to apply those lessons to other states.

Chandra: One other thing to consider is that there are lagged effects on things like hospitalizations and mortality. So when choosing a particular intervention to relax because you want to have better impacts on the economy, the tool might show you a spike a week or two later in hospitalizations and related case fatalities. So it allows for some of that.

Are there, likewise, second-order economic effects?

Just as capacity constraints in the health care sector determine the ability to treat cases, capacity constraints are important on the economic side. They cascade through the supply chain.

Aaron Strong

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Strong: Just as capacity constraints in the health care sector determine the ability to treat cases, capacity constraints are very, very important on the economic side and they cascade through the supply chain.

For example, because of reductions in commercial food delivery through restaurants and bars and the like—and because there are differential supply chains in the commercial versus retail food worlds—we are seeing major disruptions in agriculture, like dairy farmers in Wisconsin throwing away milk. All of these bits of capacity constraint combine throughout the economy to cause significant disruptions.

To what extent are these decisions always a trade-off between economics and health—or is it not a zero-sum game?

Strong: I see it much more as a prisoner's dilemma game. I would rather go to the beach, but I know that that is not a good alternative for the community. So, we can either open up completely and have significant consequences, or we can cooperate and create an outcome that may be costly in the short run, but we will have a healthier population and healthier economy in the long run.

Chandra: One of the points that gets lost in the public conversation is how interdependent these two systems are.

Individuals who work in health systems and in the broader public health community understand that economics is a critical part of people's health and well-being. Similarly, the financial and business community understand the value of having healthy workers and healthy families, both for short-term productivity but also long-term viability.

So thinking of health and economics as a trade-off is not helpful. There is a way for us to create combinations of responses that preserve the best in terms of our health, preserve the best in terms of our economy, and that also take into account ethical considerations related to vulnerable populations, equity issues, and access. Some of the tough decisions have to be made, but it should not pit health and economic systems against each other.

Do you have any suggestions for how to shift that perception?

Chandra: I'd certainly call on my health colleagues to be more clear about the way they are approaching some of these discussions. There is a critical piece of health that is about providing acute medical care and health care services. But there is also a piece of health which is about ensuring that people have housing and food and healthy environments. Presenting more of this part of the conversation will go a long way.

Similarly, I'd call on those who represent the business community and industry sectors to work hand in hand to not make this a trade-off conversation. I think we can get there, but we probably have to change the terms we are using, the data points that we are putting out there, and start to present things together as opposed to it's either one way or the other way.

Is that argument for defining health to include jobs and income going to cut it with the physicians working in hospitals right now?

You can't just give someone a call and tell them they need to quarantine and leave them to figure it out for themselves.

Courtney Gidengil

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Gidengil: The importance of thinking beyond the walls of the hospital is understood by many physicians—and will be crucial to our handling of this pandemic. For example, think about testing and contact tracing. That's going to be a cornerstone of being able to successfully reopen over the next few months. But you can't just give someone a call and tell them they need to quarantine and leave them to figure it out for themselves. Testing and tracking needs to be coupled with supports for people in quarantine, including finding housing where they can isolate successfully, helping them with meals when maybe an entire family is sick, and providing support for their overall health.

Those examples include how other countries have been handling things. What are some other lessons or evidence we should be paying more attention to?

Gidengil: We've already observed that an effective response involves, at a minimum, extensive testing. There are differing opinions about exactly how many millions of tests we need, but there is consensus that we're falling short right now.

That has to be coupled with contact tracing—getting in contact with people who've been exposed to someone who is sick and making sure that they quarantine themselves. Taiwan, for example, has been quite aggressive in contact tracing. They check in with a person once or twice a day to ensure that everything's going fine and that their needs are met.

Strong: Two things stand out to me. The first is we've been thinking about the economy as being in two bins: essential businesses or nonessential businesses. As we move forward, we need to make distinctions between different occupations.

There are some occupations that may not be essential, but they are also low-risk. And there are some occupations that are high-risk, but essential. How do we combine both to maintain a functioning society with getting people back to work?

And then the second thing is that the United States is not well-equipped to have these economic impacts go on longer and longer. To put it in perspective, the United States lost 8 million jobs during the 2008 recession. About 30 million people filed for unemployment insurance in the last month. That's pretty stark. We need to maintain individuals' connections to work and connections within the supply chain so that we don't have to rebuild an entire economy once we come out of this.

In terms of lessons from other countries, in some they've nationalized payroll. We went down that path a little bit with the CARES Act, but could do more to support labor. And more to support those owners of capital to maintain their employees. That way, when things start to get better economically, we can have a much faster recovery.

Chandra: I think there's a big set of questions now about our preparedness for any kind of crisis, which includes everything from technology and infrastructure to cooperation on global health.

We need to take a hard look at why we weren't able to respond as quickly as places like Taiwan on testing and contact tracing, health risk communication, and other first principles of health.

Anita Chandra

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Our American health system needs to take a hard look at why we weren't able to respond as quickly as places like Taiwan on testing and contact tracing, health risk communication, and those kinds of first principles of health. It's a great opportunity for us to make a stronger health system overall.

Policymakers obviously are trying to ensure that we are resilient and that our economy gets back on track and that people get healthy. Is flattening the curve still the core component of this?

Gidengil: Flattening the curve is just this concept that we're trying to keep the health care system from being overwhelmed.

In states that were hit early like Washington State, I think you could reasonably say the curve has been flattened there and is decreasing. New York seems to have hit sort of a plateau; I think we're going to see that decrease, but it's not going to be perfect bell shape curve. I think we're going to see a much slower decreasing slope on the other side, unfortunately. A lot of that is the nature of this disease. You get sick quickly, it takes some time to develop complications that require ICU-level care, and then a very long time to deescalate from ICU care.

Still, we cannot have the health care system get completely overwhelmed. It will affect the health of not only those who have COVID-19, but also those with other conditions, their willingness to come to hospital, and the secondary effects of that. We don't have just emergency care and completely elective care that you can defer for a year—there's a whole spectrum of care that needs to be delivered.

Chandra: Flattening the curve is drawn from the health care surge capacity lens. But the concept needs to be revisited in the context of the things that we've been talking about. There's also a curve in terms of our financial capacity. There's a curve in terms of business impacts and the supply chain.

And while we certainly don't want to overwhelm the health care system, what does delayed preventive care and other things mean for worker health and well-being? What does that mean in terms of industry capacity? Perhaps this an opportunity to essentially blend these curves and look at them then more jointly. That's just something to put on the table.

Strong: Economically, we have a very diverse economic base within the United States, which gives us some of our resilience. But on the flip side, when something happens it more easily overwhelms the capacities, the interconnectedness with the supply chains, or the just-in-time delivery. Maybe we need to revisit what it means to be resilient at a firm level or at an economy level rather than just saying economic diversity is good.

For instance, what redundancies are we lacking? Where are these trigger points? What does a resilient economy look like moving forward? How does policy incentivize an economy that can better absorb some shocks?

I think we can learn a lot from 2008, when we had a financial crisis that turned into an economic crisis. Now we're having a health crisis turning into an economic and a financial crisis. So how do we create resilience across the board—economically, community, and socially?

What other measures should we be thinking about in terms of reopening the economy? Or other final thoughts?

Strong: We need to take some key lessons from the past. In 2008, we made a huge public investment to get people to work. That same idea could apply today.

We could make a huge public investment, whether that's federal money coming down to do deferred maintenance or to build 5G capacity and rural broadband. These are public goods that everybody benefits from. And we should think about not just targeting individual firms, but instead targeting labor and capital generally with policies that everyone can have access to.

Gidengil: I hold out hope that we will have an effective vaccine. We need to give a lot of thought now to how we're going to communicate about vaccination and ensure that people are ready and willing to be vaccinated. Also, how are we going to distribute vaccines not just in the United States but also equitably all over the world? These are measures everyone is hopeful about, but which need a tremendous amount of planning.

Chandra: One thing that the American public has to get used to is a tough conversation not just about risk, but about loss and vulnerability. Those are tough conversations for policymakers and public officials and leaders to have—especially when they also want to calm fears and allay anxieties. But there is no perfect and there is no precise when you have an overwhelming crisis like a pandemic. We have to be able to talk about choices and the ethics of our decisions. We have to get more comfortable with those discussions—whether it's around a vaccine or reopening businesses—than we have been in the last few months.