To decide the question, whether we should continue with lockdown with social distancing measures with only a little increase in health spending as the governments all over the world are doing right now, or we should end the lockdown and increase the health spending on the required level to cater to the needs of hospitalization, we must weigh the respective cost therein.

The latest IMF study has come out with the relative costs in various scenarios. It says that without social distancing and lockdowns, countries would need to expand health systems ten-fold, on average to assist all COVID-19 patients in need of hospitalization. Under capacity constraints, effective social distancing and quarantine reduce the additional health spending from a range of $0.6-1 trillion globally to $130-231 billion, and the fatality rate from 1.2 to 0.2 per cent on average.

Since saving lives must be the first policy priority, there is no escape from increasing the health sector spending. However, uncertainty regarding the duration and intensity of the health crisis makes it difficult to estimate the requirement in the first place, and then ensuring the adequate resources for this purpose. It is in this context, the working paper provided relevant inputs. It is perhaps the first paper that attempted to project the cost for health sector country wise.

The tradeoff between saving life and livelihood would still need separate study which is out of the purview of this paper. It is also not a full-fledged cost benefit analysis, which excludes, for example reduction in traffic accidents, work-related injuries and non urgent medical expenditure. Cost benefit analysis of different types of prevention and mitigation measures for the crisis, administrative and economic cost associated with non-pharmaceutical interventions such as wide-scale quarantine and lockdown procedures and social distancing have also been excluded. It is mainly because the cost of such interventions including community engagement, screening at port entry, tracing and quarantine patients may fall into other non-health categories of spending. Similarly, the cost of testing is also excluded because the optimal testing strategy and its cost may depend on the viability of other measures. Who will bear the cost, the private or the public, is also not considered by the paper.

It has been estimated that without containment measure adopted so far, at the level of the medical facilities available at the time of outbreak, the expansion of the health system to the required level would have been economically and technically unfeasible. Without the measures, assuming every infected person infects 2.3 others, over 85 per cent of the population would eventually get infected. Assisting all patients would have required $15.5 trillion at high variable cost assumption worldwide, and $9.5 trillion at low variable cost that are equivalent of 17.7 and 10.9 percent of world GDP in 2019, and fatality rate would have tripled to average 1 per cent for all the countries of the world. Subject to technical constraints, expansion of the health system was not possible to that level, since they cannot be expanded more than 20 percent. Though additional health spending would still have amounted in the range $582-$1 trillion, that is about 0.7 to 1.2 per cent of the word GDP in 2019. If the spread is successfully contained, additional health spending would drop significantly to about $130-231 billion globally which is about 0.2-0.3 percent of the word GDP in 2019.

In a benchmark scenario, health spending with no social distancing measures, the peak of infection would be reached within 52-weeks for all the countries. In advanced economies at an average 24 weeks, in emerging market economies at 27, and in low-income developing countries 32. In all countries, the virus would eventually infect around 90 per cent of the population. At an average 9.1 per cent across all countries would need hospitalization, in advanced countries 14.5 per cent, and in developing and low-income countries 5.3. In that case health systems around the world would have to be scaled up 12-fold to accommodate all COVID-19 patients at any time. Because COVID-19 can be lethal even if one receives all needed care, mortality among the population would still be greater than zero, but would average 0.3 per cent of the population across all countries.

At 20 per cent expansion in the health sector, additional health spending would reach 5.8 per cent of GDP for low-income developing countries, as against 1.7 per cent in emerging economies and 0.8 per cent in advanced economies. With lower cost assumptions, the needed increase would be $238 billion, $30 billion and $271 billion respectively. In this scenario pressure on health spending will be lower, but at best only 2.2 per cent of population would be able to get hospitalization facility, and therefore total number of deceased would increase four times and average about 1.1 per cent of the population across all countries and 1.8 per cent in advanced economies. If peak of infection reaches around 21 weeks across all countries, infected population would be 96.4 per cent, and we would need an increase of 17.8 per cent in hospital beds and the total cost will increase to $19 trillion at high variable cost, and fatality would increase by 0.4 per cent.

In the present scenario, the entire health sector would have to be expanded on an average 43 percent in advanced economies, and 14 percent in emerging economies. In low-income economies, owing to the very low number of initial cases, installed capacity would suffice for the average country. In less successful lockdown and social distancing, by week 8, at the basic spread rate of 1.5 per patient, infection could reach 53 per cent in advanced economies, 46 per cent in emerging, and 28 per cent in low-income economies, which would be too difficult to handle. (IPA Service)