Estimating the impact of the first Covid-19 lockdown policy on net life quality in the UK Cost-Benefit Analysis of the lockdown
30 September 2020
Abstract:
This paper analyses the cost-benefit analysis of the Covid-19 lockdown in the UK. The paper takes into consideration the cost of the loss in life quality due to lockdown compared to life without such measures.
This cost has been undermined by other works on cost benefit analysis. The paper quantifies the maximum cost of net life quality that the UK government would have considered if they did so for lockdown to be economically rational. We determine the latter by following the hypothesis that benefits should be greater or equal than the costs of lockdown. The only variable of this equation is the cost of lockdown and is determined by this equation.
We come to the conclusion that the average considered loss of life quality must be at a maximum of 3% compared to without the strict measures imposed during the first lockdown.
Introduction:
Without relevant cost-benefit analysis on net life quality the UK Government imposed a national lockdown following the predictions of Professor Neil Ferguson... A simplified cost-benefit analysis of the impact of this approach suggests a reduction in net UK life quality that seems unreasonable.
I present in this essay a quantification of the major costs and benefits of the lockdown policy.
The major benefits considered are: - Prevented COVID-19 deaths.
- Related medical costs.
The major costs considered are:
- Reduction in national income - Life quality factors
The lockdown was introduced in late March 2020 and was slowly eased 3 months later in July 2020. The lockdown that is considered in this essay, is the restrictions put in place in the latter time frame, against movement and considers the rules that people should stay at home except in exceptional circumstances.
The big difference that is portrayed in this essay compared to others in the same domain is the reflection of the loss on quality of life through lockdown compared to without. This factor is merely impossible to calculate but, through a cost benefit analysis, we can approximately deduct what the maximum loss of life quality would have to be, for the lockdown to be economically rational.
I-Calculating the Benefits of the Lockdown
1- COVID19 Deaths Prevented
The modelling of Professor Neil Ferguson (Imperial College, London) was widely thought to have been key in persuading the UK government to impose the national lockdown, so we will retain Professor Ferguson’s data to predict the number of COVID19 deaths prevented by the lockdown.
These predictions have been criticised by studies like the Miles study as a significant over estimation of the number of COVID19 deaths without the imposition of a national lockdown.
In the scenario of no lockdown Ferguson’s model estimated that, 500 000 Covid-19 deaths.
Post lockdown, David Miles, Professor of Financial Economics at Imperial College estimated the number of deaths due to the pandemic to be at 60,000 deaths.
This calculation works out how many lives the lockdown saved: Potential deaths – Actual deaths
500,000-60,000 = 440,000
According to this simplified analysis the lockdown saved 440,000 lives.
It is estimated in the Miles study, that on average each person saved through the lockdown policy could expect an average of 10 quality life years post lockdown.
This calculation works out how many life years were saved: 440,000 x 10 = 4,400,000
Thus, according to these imperfect hypotheses one may estimate the lockdown benefit at 4,400,000 quality life years.
The average evaluation of one quality-adjusted life year (QALY) is approximately ￡ 30,000. However, for the purposes of the current analysis we will retain the National Institute for Health and Care Excellence for end of life technology of ￡50 000/QALY ...
This calculation works out the valuation of the deaths saved through lockdown: 4,400,000 x ￡50,000 = ￡220,000,000,000
The lockdown policy benefit can thus be expressed as a value of ￡220 billion in this context.
2- Hospitalisation Costs Prevention
Without the imposition of the national lockdown policy one can reasonably conclude that significantly higher numbers of hospitalised cases would have been experienced & the costs to the NHS would have been substantially higher.
The Office for National Statistics estimated that approximately 50% of Covid-19 deaths happen outside a hospital, mainly in care homes.
This calculation, works out the deaths which would have occurred in a hospital: 440,000 x 50% = 220,000
Retaining these estimations, we can hypothesise that 220,000 extra deaths would have happened in a hospital.
The Scottish Intensive Care Society Audit Group estimates survival rate in an ICU bed to be approximately 60%. For simplicity, we assume that all deaths in a hospital happen in an ICU unit.
This calculation, works out how many ICU units would be needed: 220,000 / (1-0.60) = 550,000
According to the hypothesis that we have retained, 550,000 patients would need intensive care ICU beds.
An imperial College study estimates that a third of all hospitalisation need ICU beds. Therefore, two thirds of the other Covid-19 hospitalised patients would require standard beds.
This calculation, works out how many standard beds would be needed:
550,000 x 2 = 1,100,000
A number of 1,100,000 patients would need standard beds.
It costs the NHS approximately ￡2,000/day for running an ICU bed and ￡ 1,000/ day for running a Level 2 High Dependency bed. The Paul Dolan and Pinar Jenkins study estimates the average LOS (Length of Stay) for an ICU patient to be at 10 days, and for a non-ICU patient to be at 6.4 days.
Operating costs of saved ICU patients: 550,000 x 2,000 x 10 = 11,000,000,000
The extra operating costs for patients needing intensive care would have been 11 billion pounds.
Operating costs of non-ICU patients: 1,100,000 x 1,000 x 6.4 = 7,000,000,000
The extra operating costs of non-ICU patient would have been 7 billion pounds, bringing the total savings on operating hospitalisations costs to 18 billion pounds.
In the case of no lockdown we would have also saved costs linked to the expansion of beds needed to deal with the extra hospitalisations. For that, we would need to know the maximum capacity required, at the peak of the pandemic that would have occurred. For simplicity reasons, we assume that the pandemic evolution, would be similar to the one in Sweden, where no lockdown measures were put in place.
It is impossible to know if Sweden has obtained herd immunity at this date, but we can consider that the country has gone through a first natural pandemic wave. We assume through the evolution curve that this wave started on the 2nd of February, when its first case was identified and ended on July 26th, with a global minimum on its evolution curve of 46 new cases. 5,741 deaths were reported during the first wave. The 10 days ICU admissions average peaked on the 4th of April with an average of 42 ICU hospital entrances per day. Patients needing intensive care stay an average of 10 days, so in Sweden there was a maximum occupancy of approximately 420 beds. There are on average, two times more patients needing standard beds, so we assume that there was a maximum occupancy of approximately 1,260 beds.
In this model of the pandemic wave in Sweden, for 5,741 deaths the maximum occupancy was 1,260 beds, 22% of the number of deaths. We will take this simplified ratio, to determine the maximum number of beds needed in the case of the pandemic without lockdown.
This calculation works out the total bed capacity we would have needed: 500,000 x 22% = 110,000
According to this calculation the UK would need 110,000 extra beds at the peak of the pandemic.
At the beginning of 2020 there were, 102,000 hospital beds in the UK. In March 2020, the government decided to free up 30,000 beds of the total capacity to manage Covid-19, refusing admissions to patients not needing immediate hospitalisation. They also decided to build new hospitals in the country, creating a total of 30,000 new beds.
This calculation works out the extra bed capacity we would have needed: 110,000 – (30,000 +30,000) = 50,000
50,000 new beds would have been required without lockdown.
It costs the Louisa Jordan hospital in Scotland 43 million pounds to create 1,000 new beds. For the difficulty of enquiring on the costs of hospital expansion, we will use by simplicity the Louisa Jordan hospital as reference.
This calculation works out the cost of the building of the extra capacity: (43,000,000) x 50 = 2,150,000,000
Thus, taking the Louisa Jordan costs as the reference for the average cost of a bed, the expansion of the new beds would cost 2.15 billion pounds.
Total savings on hospitalisation costs: 2,150,000,000 + 18,000,000,000 = 20,150,000,000
According to these hypotheses we can estimate the benefit of the lockdown in terms of avoided hospitalisation costs as approximately 20.15 billion pounds.
Thus, Total savings on the major costs of no lockdown is: 220,000,000,000 + 20,150,000,000 = 240,150,000,000
We can conclude from these calculations that the benefits from lockdown in the UK can be evaluated at approximately ￡240 billion.
II-Calculating the Major Costs of Lockdown
1-Reduction in National Income
The impact of lockdown on national income in the UK is estimated by the Miles study as a reduction in GDP of 9% in 2020 compared to a 3% reduction in the absence of a lockdown policy.
GDP in 2019 was 2,2 trillion pounds.
This calculation works out the UK output loss:
2,200,000,000,000 x (0.09-0.03) = 132,000,000,000
Hence, we assume an approximate loss of 132 billion pounds on UK output.
2-The Cost of Loss in Life Quality
However, the largest cost of the lockdown policy has been largely ignored by existing studies. As a result of the lockdown policy we can assume that the average quality of life for UK residents has been negatively affected.
There are 66.5 million residents in the UK. For simplification purposes of the current analysis, we retain the same estimation of QALY as above (￡50,000).
This calculation works out the valuation of 1 year of life of the total UK population:
66,500,000 x 50,000 = 3,325,000,000,000
Thus, we may consider that the valuation of 1 year of life of the total UK population is 3.325 trillion pounds.
We will note x, the ratio of loss in life quality with lockdown in 2020 compared to without it.
The cost of loss in life quality is:
(1 years’ worth of life of UK population) x (% loss in life quality with lockdown) 3,325,000,000,000 x x
Total of the major costs of lockdown: 132,000,000,000 + 3,325,000,000,000 x x
III-Conclusions: Cost Benefit Estimation of the Lockdown Policy.
In economic terms, with the assumptions we made, for the government to justify its measures, this equation must be true:
Total Benefits of the lockdown > Total Costs of the lockdown
QALYs Saved + Reduced Hospitalisation Costs > Output costs + Life quality cost 240,000,000,000 > 132,000,000,000 + 3,325,000,000,000 x x
So: x< 0.032
RESULTS:
In economic terms the first lockdown would be justifiable if the average quality of life of UK residents during lockdown was at least 96,8% as good as the average quality of life than without lockdown. *
*with the assumptions we made
Limitations of the Analysis:
1) Factors tending to underestimate the benefits of the Lockdown policy:
-We do not account for the potential shortage of staff in the extra hospitalisation which would be likely to lead to rejecting more admissions, and a rise in death rate for patients denied hospital care (for both Covid-19 and non Covid-19 pathologies). This is a significant weakness in our model even when partial solutions such as recruiting staff from abroad and emergency training of non-medical staff are taken into consideration.
-We do not consider the follow-up medical costs.
-The average loss of quality of life is subjective. It counts everybody, including the non-prevented deaths, the people deeply emotionally, affected by loss of loved ones through the extra deaths, the personal health damage caused by the virus and the general rise of uncertainty linked to danger... These people might have had a better quality of life without lockdown. These considerations should be analysed thoroughly in order to determine if the average loss of quality of life is less than 3% or better, without lockdown... Despite these caveats it seems reasonable to conclude that Lockdown for the great majority of residents resulted in an important decrease in quality of life.
-We do not consider for the reduction in non Covid-19 deaths due to lockdown (road traffic deaths, AIDS...).
-We only consider that Covid-19 patients in ICU die, not considering the deaths of Covid-19 patients in non-ICU units.
-We do not consider the home-based medical costs linked to Covid-19.
-The peak of 110,000 beds needed at one time, could be higher as the pandemic behaves very differently between the UK and Sweden.
-When evaluating a quality life year, we are considering, with no inflation, that a quality life year this year, is worth the same as in the years after this present year, hence, we are not discounting the value of a quality life a year in the future. The average number of quality life years of a Covid-19 death saved through lockdown is lower than the average person living in the UK. This disadvantages the value of the prevented Covid-19 death compared to the average.
-The estimations of the UK output fall created by lockdown are imprecise, it could be that the UK output (2020 GDP) was less affected, lowering the cost of lockdown.
In the Excel sheet we include a scenario where output is less affected by lockdown.
-The potential reputation loss of making the choice, to sacrifice lives for a greater life quality of the general population.
2) Factors tending to underestimate the costs of the Lockdown policy:
The estimation of 440,000 deaths is likely to be a significant overestimation. The Paul Dolan and Pinar Jenkins of LSE study estimated a prevention of 159,000 deaths. Further, the number of estimated saved lives retained in this paper, does not consider that some of the people saved by lockdown would have died this year regardless. Neil Ferguson estimates that between one third and two thirds of the people who would have died from the virus without lockdown, would have died or will die this year anyway.
-The estimation of the Miles study that patients who would have died from Covid-19 without lockdown, enjoying an average of 10 quality life years may also be considered an overestimate. The study calculates these life years by
assuming that the people who would have died from the virus had a health of a normal person but it is considered by the ONS that 90% of the deaths occurred from the virus had (co-morbidities) predisposed conditions (heart disease, diabetes...). Furthermore, the quality life year of a young person is valued equally to the value of an older person. This may be considered to be a major weakness in the analysis. The average value of a life year of a young healthy person might be considered higher than the average of an older person with co-morbidities, and the average number of quality life years of a Covid-19 prevented death should on average be considered lower than the average person of the same age without co-morbidities .
In the *Excel sheet we consider a situation where the average number of quality life years of a prevented death through lockdown is lower than 10.
-We considered hospitalised Covid-19 patients not needing intensive care to automatically be in a level 2 high dependency bed. Some of these patients are in ward beds, which have significant lower operating costs (￡500 compared to the ￡1,000 of a Level 2 bed).
-The estimations of the reduction in UK GDP as a result of lockdown are probably underestimated.
In the *Excel sheet we analysis a scenario in which GDP is more severely affected by lockdown.
-We do not consider the educational and the mental health costs of lockdown.
*Link to excel sheet: https://drive.google.com/file/d/1E27hiTGb4U8dS5sAQqozGrOtnZiDg18Z/view?usp=sharing
Additional notes:
1-Ratio of number of quality life years saved
The average age in the UK is 42 years old. The average life expectancy in the UK is 81 years, hence we assume the there is an average of 39 quality life years ahead per person.
42 x 39 = 1,638
1,638 x 66,000,000 = 108,000,000,000
There is approximately 108 billion quality life years.
We estimated, the lockdown saved 4,400,000 quality life years.
4,400,000 / 108,000,000,000 = 0.00407%
The lockdown has saved 0.00407% of the total number of life years in the UK.
2-Final conclusions
Despite the limitations of the data that we retain to determine the cost benefit-based wisdom of the decision to impose lockdown the conclusions of the model are clear. If, as seems reasonable, the average loss of quality of life of UK residents was far greater than beyond 4% as a result of lockdown, the rationality of lockdown can be coherently contested from an economic perspective.
In a rational world, lockdown would have not been imposed and alternative approaches to the pandemic would have been taken. Accordingly, to the analysis above, lockdown was a political response to a pandemic in which the role of the media has been central. Political leaders have taken decisions based on political agendas rather than the purely rational approach that a cost-benefit analysis would imply.
If this crisis had happened in 1945, in the context of post war Britain with the data available in 2020 lockdown would have been unacceptable by a society with the perspective of a war economy. The costs to our personal freedoms would have been deemed too high.
Perhaps the UK has become accustomed to freedom and the idea of it not being threatened, to the extent that freedom is no longer valued as it would have been in a more troubled era.
Bibliography
-Miles, D., Stedman, S. and A. Heald (2020): Living with COVID-19: balancing costs against benefits in the face of the virus, mimeo – QALY average and Lockdown death count estimation 28/07/2020
- Office for National Statistics - gardian.com - More than half of England’s coronavirus- related deaths will be people from care homes – 07/06/20
-Imperial college- The telegraph Almost one in three people given hospital treatment for coronavirus will need intensive care- 18/03/20
- Estimating the monetary value of the deaths prevented from the UK Covid-19 lockdown when it was decided upon – and the value of “flattening the curve” - Paul Dolan and Pinar Jenkins, LSE, 18 April 2020 - https://www.lse.ac.uk/PBS/assets/documents/Estimating-the- monetary-value-of-the-deaths-prevented-from-the-UK-Covid-19-lockdown.pdf - LOS estimation
- https://www.gov.scot/news/construction-of-nhs-louisa-jordan-complete/ - cost of building hospital beds
- https://www.worldometers.info/coronavirus/country/sweden/ - total number of deaths at any given time Sweden
- https://www.statista.com/statistics/1102193/coronavirus-cases-development-in- sweden/6 - Number of new cases per day Sweden
- https://en.wikipedia.org/wiki/Template:COVID- 19_pandemic_data/Sweden_medical_cases - New ICU entrances per day in Sweden
- https://www.nuffieldtrust.org.uk/resource/hospital-bed-occupancy- NHS England, Bed Availability and Occupancy – Number of UK hospital beds
- https://www.getsurrey.co.uk/news/surrey-news/number-hospital-beds-lay-empty- 18842951- hospital occupancy rate of Surrey – Occupancy rate in Surrey in pandemic confirms discharging of hospitals
-https://www.england.nhs.uk/coronavirus/wp-content/uploads/sites/52/2020/03/urgent- next-steps-on-nhs-response-to-covid-19-letter-simon-stevens.pdf – Discharging of 30 000 beds for Covid-19
- Scottish Intensive Care Society Audit Group - BBC- A third of Covid-19 intensive care patients do not recover, study shows- 14 May 2020
- https://www.wales.nhs.uk/documents/Delivery-Plan-for-the-critically-ill.pdf - Operating costs of hospital beds
-https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/death s/bulletins/deathsinvolvingcovid19englandandwales/deathsoccurringinmarch2020 – 90% of the Covid-19 deaths had a predisposed condition