ANN ARBOR – In my experience of being directly involved managing outbreaks in the past – H5N1 and AIDS – the COVID 19 outbreaks will get worse and last longer than most in the U.S believe today. I wrote my first communication 20 days ago on March 2, 2020 because I am concerned that people think that the Coronavirus is hype. Things have worsened rapidly; my blogs to date remain directionally correct.
(NOTE – I have been working with Johns Hopkins School of Medicine (ES4P) to help provide continuing medical education to providers and patients for the last 3 months and a course is available now.)
Questions are changing from what is a Coronavirus and how do I protect myself to how long will this last and how bad will it get.
COVID 19 impact is underestimated by those unfamiliar with outbreaks because it grows exponentially with ripples. If you respond to what is happening now, you are 2x behind next week, and 40x behind in a month. This makes predictions hard. In China, experts say if they had started social distance policy one week earlier, they would have had 50% less deaths. If they had started one week later they would have had 9x more deaths. It is better to over-respond to epidemics early than to try to catch up after they hit.
Outbreak impact reports are consistent between Wuhan and Hubei Province, Milan and Lombardy in Italy, and now in New York City and NYC Region. Epidemiologists are starting to get the data required to answer the basic questions of how long and how bad will it get. The answer remains – insufficient data. No one’s projections are accurate today. Listen to updates from CDC and WHO. To plan, a best guess is needed as a starting point, so here are some high-level, fact-based preliminary summations:
In impact models, the health models drive the economic models, so
Health Impact Projection – best guess – The current outbreak will last until at least August. Case load will peak in May, tailing from May to July. Transmission will be broken in late August through September at which point we must have rolling prevention measures in place to avoid a bounce-back. Assuming no November bounce-back, the U.S. healthcare system will be back in control.
This projection assumes that at the end of September our healthcare system will be capable of testing and quarantining individuals and deploying case-based measures rather than having to intervene with whole populations. In September we regain a level of normal living, control major new outbreaks/bounce-backs and expect that long term preventions like experimental drugs/vaccines and herd immunity will control the next season COVID outbreak. In late 2021, COVID will become an endemic, managed disease in the US like the flu. This best guess could be much worse (but not much better), and is a start for personal and public planning. Past crisis management experience teaches us to over-react early and pull-back for best results. 15 day windows are not the basis for planning or communicating and are reducing the scale of the required response now.
The US will have higher than average OECD COVID-19 infection rates of 60-80% and death rates of 2.3% overall. Outbreaks will be spikey. We should expect 5.6% mortality in the areas of high spiking where the health system is overwhelmed. Flattening the curve will work in some lower population density areas, but not in most of the US metro areas. Our hospitals in these areas will only have 40 – 60% of the necessary beds and 20 – 30% of needed ICU capacity through the end of May. They will be overwhelmed, causing mortality rates of over 5% in these areas. In my area of Ann Arbor, MI, the Detroit and Chicago regional health networks will be overwhelmed in April, despite a better than US average public response. If you live on the coasts, the SW or near a top 20 metro community, expect the same. Rationing will move from testing today to care fast.
US Pandemic management response in the last 3 months has consisted of –
- Detection management – first confirmed case: Jan 30th US, Michigan March 10th to
- Contact transmission management: US CDC social distance policy on March 14th and now to
- Community spread management : first detected: Feb 26 in US, Michigan, March 20th
Each phase response impacts the next. US response to detection management lags all other countries with advanced health systems by a factor of 10 or more. US response to social distancing is improving but leaky – it is better than UK, Iran and Italy but worse than China (and smaller developed countries). Today, 75% of the US population lives in areas without official social distance policies in place. The US is behind in community spread management, without adequate testing, isolation or quarantine facilities in place.
62% of the US population thinks we are over-reacting to Coronavirus. We are actually underreacting – obvious by the speed and breadth of the COVID-19 epidemic in the US. Only 26% surveyed changed everyday activities in a Kaiser Poll conducted March 17th. Without more drastic measures, we will not be able to control COVID outbreaks through the end of May as the epidemic runs its course.
Right now, we are too small and too slow in our response in the US – we can make up about 60% of our current peak estimated shortfall if we eliminate all non-emergency care; redeploy resources from military, non-outbreak regions, retirees, and extended hour healthcare workers; and mandate healthcare and supply manufacturing expansion by 100% and maintain social distancing for three months. We still will be at a net 40% deficit in outbreak areas – best case. In severe outbreak areas, hospital treatment demand will exceed supply be over 2.5x if we do not react now.
Despite progress and sacrifices made, we are falling behind. I support President Trump (and our governors) for his daily discussions (they must become more fact-based, pro-action oriented and dashboard/goal driven); the innovation of our industry to make special times available to customer segments; the response of the e-economy; and to the public for accepting the fast shut down of schools and non-essential services. We need more if we are to move from being reactive to proactive in management of the COVID19. Specifically,
Detection Management – the US needs to test over 1M people per week and in some outbreak areas, testing per capita needs to be 5x that goal per capita. To date we have only tested about 300,000 people in the US. The US lags other countries by a factor of 10 (in Japan the next worse OECD nation) to 5000x (in Korea) in detection management and testing. The biggest issue is that healthcare workers and police who are exposed must self-quarantine for 14 days when they cannot be tested. Lack of tests reduces our capacity and threatens our ability to respond to outbreaks. Without testing, we cannot act proactively, and the COVID 19 outbreak will be uncontrolled for longer periods leading to more deaths and longer shutdowns.
Recommendations – Current recommendations to ration testing demand must be replaced by increasing the supply of tests. Federal Government has oversight to prioritize test areas and subjects and must respond now with the Defense Production Act. We are not at WWII response levels. Create dedicated facilities, stop or deprioritize all non-acute/routine healthcare testing. Increase the number of drive through facilities now by 10x. Wait times should be less than 15 minutes and they are over one hour at current low levels of testing demand. . Send the military to administer tests and build temporary facilities. More than a National Guard/Reserve Force response is required – active military duty troops are required now.
Take over manufacturing and lab operations to solve our 500% under-capacity in labs, 500% backlog in test processing results, and one month backlog in swab supply. Manufacturing expansion of PCR machines and reagent supply must be deployed now. Self-administered tests must be made available now The FDA must immediately authorize new, faster ELISA tests that were developed in China in January to be performed here. These tests will show who has antibodies and is immune and who is still at risk as the epidemic progresses. Rapid temperature sensing device manufacture must be scaled now. Temperature sensing should be performed at every likely congregation of people – especially in and out of hospitals (see below)..
Lab sample management capacity, run efficiency and throughput times must be brought down with this intervention. Daily fulfilment dashboard reports vs plan from the Presidential task force should be announced for every region of the US. Pricing for tests must be controlled and testing must remain completely reimbursed and free for all requesters without prior authorization requirements. Today, mild symptoms can be diagnosed over the phone. Medical professionals must track all positive results and contact histories, managing these patients remotely in quarantine. People who are having trouble breathing, have persistent pain or pressure in the chest, are confused or difficult to arouse or have bluish lips or face should go to the hospital immediately.
Contact Transmission Management – Social distancing has just been in place for about 10 days and is leaky. Five states have issued stay in place orders covering up to 32% of the population and five states have ordered non-essential services closed at this time covering 22% of the population. Despite these orders, people are still congregating and not maintaining distance.
Recommendations – Crowd control should be done proactively now by the military and expanded police forces. Crowd control flow must be in place – the images at O’Hare airport shows a desperate need for military to keep congregating areas small. Every point of large anticipated crowds should be controlled by enforced rapid temperature monitoring of all people entering a venue before they are allowed to enter – this includes public transport, hospitals, doctor offices, prisons, essential workspaces, grocery stores and pharmacies, shopping areas, and public parks and venues with population density. Those failing the test should be physically separated and self-quarantined for 14 days immediately until more rapid definitive tests are available. If it takes MASH units and tanks on the beach to enforce screening control and social distance policies during spring break, then they should be deployed now. Generals responsible for troop deployment should give daily updates with FEMA with the Presidential Task Force. These actions can measure people in public regularly to understand disease levels and locations. At hospitals these actions can reduce viral spread during outbreaks by 57% – by far the best protective measure we have. Do not visit any crowded area without these measure in place.
We must triple our telehealth capabilities immediately. Infrastructure should be expanded and physicians in specialties other than infectious disease should be ordered deployed to the call triage trees. Reimbursement for diagnostic and monitoring telehealth services must be guaranteed without prior authorization. Call wait times and abandonments must be reduced. An immediate six month lifting of all restrictions on physicians and nurses to work beyond state boarders is required to support outbreak areas.
Hospitals will be overrun because patients will be admitted, but not be safely releasable in 5.5 days (ave length of stay) to the home. COVID 19 patients are remaining hospitalized for 12 days. Respiratory patients must be separated from other COVID19 patients to reduce mortality rates. Assuming 81% mild outpatient care, 14% hospitalization levels and 4.7% severe patient loads requiring supplemental oxygen and 4% ICU rates with a 50% fatality rate, every hospital in the US must be deploying a plan to expand capacity by 100% and ICU capacity by 300% by April 1. This means taking over and retrofitting abandoned hotel, school dormitories and convention center rooms now. Oxygen is likely to run low and should be centrally stockpiled for spikes in demand now. We have only 80 certified biocontainment beds in the US employing about 8000 professionals at 10 hospitals. We must build new separate secure temporary biocontainment facilities now by the military.
Hospital employees will be unable to control transmission as they run out of N95 masks, gloves, gowns and shields/goggles (personal protective equipment) in that order of priority. Transmission of the disease to first line healthcare workers will expand exponentially to 80% infection rates in outbreak areas without immediate actions to improve supply. Expanding existing and retrofitting new raw material and finished goods plants to meet PPE demand will save lives and avoid rationing. Use 3D printing technology and reconfigure other plants (e.g., Ford will supply 100,000 ventilators in May). Supply chain mandates to increase the capacity of hospital PPE material on hand, beds should be mandated (not voluntary) and implemented within one month. We must fill our emergency reserve to more than 0.1% of the market to prepare for a viral rebound and new outbreak areas. This must occur as hospitals are running at full capacity and many key health professionals are sick or self-quarantining due to exposure. External volunteer, government and military support must be deployed. FDA, NIH, CDC and VA should shut down all non-acute activities and deploy all personnel to coronavirus activities. Re-use and raioning of disposable PPE will be required. FDA and NIH should immediately scale, test and release effective protocols for disinfection and re-use of PPE. Rationing and reuse protocols should be mandated centrally otherwise the uptake of effective measures will be too slow, scattered and dangerous.
As outbreaks strain delivery networks, triage management systems must be developed and deployed to allocate care for the greatest impact. The FDA, CDC, VA and NIH should work with leading experts to develop the protocol for triage and resource allocation to patients based on clear, objective criteria now before the systems become overwhelmed. Best practice care management networks should be formalized to minimize mortality rates.
Community Spread Management. We have no immunity, no drugs and no vaccines to control the exponential community spread of this virus today. Our best short-term defense is herd immunity which comes after a person contracts and recovers from COVID19. (Recovered COVID patients have been re-infected, but antibody does help confer immunity to COVID19.) About 12 to 18 months of immunity is typical for coronavirus in general (there are 6 others).
With COVID 19, herd immunity comes at a tremendous short term mortality cost. Achieving herd immunity (if the transmission levels are 2.2) requires 55% of the population to be immune. This means that over 180M people would need to contract and survive the disease in the US. At the mortality rate of 2.3% that is likely if we “let the virus run its course,” this would mean 4.2M people would die and 35M would be hospitalized with severe disease before we achieved herd immunity. Even if we were able to control infections to those under 65 and without underlying conditions and we achieved mortality rates of only 0.2%, then 300,000 young, healthy citizens would have to die to achieve herd immunity. This is why we only consider herd immunity strategies when we have vaccines for the disease
80% of deaths will occur in those over 65 years old and those with heart, hypertension, lung and diabetes conditions (in that order of risk) will have up to double the average mortality rate. The vast majority of deaths occurring in patients under 65 will be in patients with other underlying conditions. Patients in these categories should immediately replace last wills and testament documents with a revocable trusts so their estate can care for them in the event of incapacitation due to COVID 19.
Recommendations – The FDA, NIH, CDC and VA should shut down all non-acute activities and deploy all personnel to coronavirus activities for the next 4 months. Rapid, low-cost, whole-blood ELISA-based sera antibody tests for COVID 19 should be developed/approved/expanded immediately. All people should be tested for these antibodies. People who have the antibodies should be monitored for immunity as they re-enter the workforce and population level protection should be reported regularly by the CDC.
Worldwide sourcing and testing of potential new drugs, vaccines and symptom relievers for coronavirus has been undertaken and must accelerate now. Currently the WHO lists 70 potential drugs and 20 vaccines. Master protocols should be designed by regulators and industry to rapidly compare the safety and effectiveness of all these medicinal candidates simultaneously with randomized subjects worldwide. Regulatory controls for compassionate use, right to try and IRB-investigator protocols should be loosened under the control of the FDA to maintain statistical power in testing. Manufacturing scaling should be done and subsidized now during testing so promising drug and vaccine candidates can be ready with millions of doses on day-one of approval. Write-offs for failures should be immediately tax relieved to avoid incenting the promotion of less effective interventions by industry trying to recoup losses.
The search for antibody cocktails that suppress the virus so people get less sick like Tamilfu for the flu will help provide a backstop and shorten hospital stays. Other drugs candidates under clinical investigation include Remdesivir, Chloroquine, Oseltamvir, Lopinavir/ritonavir to prevent viral replication and Tocilizumab, and corticosteroids to reduce inflammation. No candidate has been recognized as having high potential yet by regulators due to insufficient human efficacy testing to date. Patients should speak with their physician and pharmacist before purchasing anything to treat this novel virus.
The goal for testing and market availability of antibody cocktails should be as little as 3 months. The goal for expanded label drugs for should be tested and available in as little as 6 months. Vaccines in as little 12 months. If we can do better with safety, great – but these are likely the fastest possible responses we have to preventing community spread. These progress against these goals should be publically reported weekly by the FDA.
Flu and pneumonia vaccines should be offered for free so people do not contract COVID 19 with other diseases. COVID 19 appears to make people more susceptible to these diseases, not less, after remission.
Economic Impact Projection – Best Guess. No one has data or precedence for accurate forecasting. I do have an MBA from the Harvard Business School and have helped develop policy for the World Bank, countries and industry. I do not have a PhD. in quantitative macro-economics.
We have better control over the economic impact than the health impact of COVID19. However, the healthcare impact will drive the depth, breadth and length of the economic impact. The best guess health impact is longer and deeper than most are expecting in the U.S. Unlike the necessary health policy response simulating a war (which stimulates a down economy due to demand), our economic response must be coordinated with the health policy but apply different levers. It must be more like a bridge loan for a natural disaster that causes a massive demand destruction. Tom Friedman made an argument to wait 15 days and then allow the low risk populations return to work to reduce the economic impact. Having faced this policy decision in the past, I can say if we do this, we will only have to reverse course and face a deeper health and economic crisis next month than we are facing now.
Social distancing will lower the infection curve, but will deepen the economic slowdown trough. The economic impact will occur in three waves
- Economic Slowdown and Business Closures – now, peaking in August
- Job Losses – now, peaking in August
- Wealth Losses – in 12 months
Economic slowdown impact due to social distance requirements – Goldman Sachs estimates that the economy will contract 24% in q2 of 2020, Morgan Stanley is forecasting a 30% drop, Fed Governor Bullard says the impact through 2020 q2 could be 50% drop in GDP. Applying my best guess health impact outlined to each sector and adding them, then the economy will be down about 3.3T$ (62%) contracted for q2 and rebound to 1.3T (25%) contracted in q3 and back to “normal” in q4 for a total impact that destroys or delays $5.6T (27%) in the $21.2T US GDP economy. This is an unprecedented rate and depth of economic decline in the US and across the world. This assumes no rebound of the virus in the fall and a 5% uptick in q3/4 – so may be optimistic.
Generally businesses will focus on preserving their core, cut costs and cut/delay capital expenditures during the economic shut down. This downturn will impact small business more because they have no borrowing collateral and typically have about 2 weeks of cash on-hand. Corporate cash-flow is the difference between permanent damage and a temporary shock. Large companies need loans and small and medium businesses need cash now to avoid bankruptcy.
Recommendation – Congress must act to release funds and reduce costs and regulatory burdens immediately. Funding does not need to plug the entire projected $5.6T loss, but it needs to be much more and much faster than the 1-2T$ response currently in discussion with Congress. Based on the job preservation analysis below, the response should be about $4.3T immediately. This may be a slight overresponse, but is necessary to prevent massive corporate bankruptcy and avoid permanent damage to the economy. This money should flow directly to employee payments to prop up demand, not to expand cap ex (unless directly part of the emergency response to COVID19 outbreaks) or stock price.
The challenge is that unemployment checks take too much time. It is much more efficient to move payments to workers through the existing employer infrastructure. Forgivable electronic transfer grants for all companies that keep workers (including part-time workers at pre-crisis levels) is required. These grants can be forgiven over several years or treated as a loan if for each employee that must be let go. Health insurance must continue to be available privately and publically to all citizens to prevent a total health crisis.
Commercial and residential mortgage liquidity must be shored-up with options for payment hiatus and interest recovery after the crisis has passed. If mortgage backed security trading ceases, it could freeze markets. Mortgage foreclosures must be postponed for 6 months. ETF/money market, hedge fund and shadow banking support is also required to get through the crisis. If these markets are allowed to free fall and asset values plummet in liquidations for cash and margin calls, then permanent economic damage will occur. Student loans payments must deferred for 6 months.
The Fed has been responsive and this must continue. It should treat this as a liquidity crisis not a credit crisis (2008) and immediately make its discount window open to all asset classes, especially municipal bonds. We cannot have our local governments responsible for massive surges in unemployment and SNAP & Medicaid unable to access funds at will. The Fed window should be open to corporate bonds and paper. Quantitative easing is required immediately – purchase all asset classes, including non-agency paper – likely inflow for the next 3 months exceeds $1T. Agencies in consort with the Fed should temporarily suspend mark to book requirements and lower bank reserve requirements. The signal must be “liquidity is there, no markets will freeze,” and there will be enough action on both sides of transactions to support trading. Targets should be set to preserve money supply at the levels projected prior to the COVID19 crisis. Without this, there is a risk that it will take 10 years to recover – and the labor market and capitalism broadly may be at risk globally.
Job Losses. Without immediate intervention, government unemployment measurements could drop to 26% by the end of q2 and true levels are likely to be 47%. This is over 60M people sick or not working. 82M workers are part time and many of these jobs are at risk, 42M retail worker jobs at risk, 13M restaurant workers jobs are at risk. If 80% of the US population is living paycheck to paycheck and we cannot target them initially, then 3.3T$ is probably right in q2 to keep the economy from crashing and about 900M$ is right in q3 to avoid a long term economic damage across employers and employees. This is not a stimulus – this just keeps the economy in a coma during the healthcare intervention. The total package needs to be about 4.3T$ with most of it released now to over-respond.
Unfortunately unemployment takes time to turn on and is only about 60% of wages for a limited time. Manufacturing and service industry slow-downs (89% of our economy) and job cuts are close behind as demand falls. Current unemployment is salary capped – these caps must be removed through the epidemic. Current unemployment is about 50 -60% of salary and needs to be brought up to 80% of salary immediately to avoid a severe, long term recession following the epidemic.
Compared to other OECD nations, the US must do more, just to stand still. The UK is guaranteeing 80% retention of income up to $25K pounds throughout the epidemic, no strings attached and no time limit. Denmark is guaranteeing incomes up to 35K Euros. Germany is announcing a 750B to 1T Euro “stimulus package.” Germany, The UK and Denmark have a much more robust safety nets in place and automatic payment systems to support programs like this immediately. They are offering larger per capita stimulus packages with a more advanced starting point compared to the US. At a minimum for workers, the US should consider a temporary universal basic income policy of $2000 per month to all households below that income during this epidemic to lead competing economies and to cut overall economic recovery times. This is double the Yang proposal and would cost $1.4T in q2, and $600B in q3 2020 directly to employees/payrolls.
Wealth Loss. When the virus is controlled, the health system is normalized and the economy has been maintained during the economic freeze required to respond to the virus, then we may be able to bounce back quickly to our former economic trajectory. This is unlikely given our response to date, but is an important goal. Without recommended corporate and employment actions above, it is likely we will go into a prolonged recession. The Timely, Targeted, Tempered TARP Federal response of the 2008 crisis was too small and too slow. It took 10 years to recover from this policy. Congress must act quickly or we will have permanent economic damage from the required health response to COVID19.
Asset values will float to new levels of equilibria, time will be needed to renegotiate and re-paper contract commitments, covenants and terms/conditions to reflect new reality. Mindsets and frames of reference will change. Consumers and retail investors may take time to re-enter a down market and long-term deflation could occur if we mismanage the crisis.
As the “every nation for itself” status during the health crisis returns to one of greater global economic coordination, a policy framework like Bretton Woods will need to be established upon the subsidence of the virus to recover the global demand function and restore confidence. Without it, a permanent deflation of asset values is likely globally.
As baby-boomers reflect on their losses, they will cut spending, demand will decline further and more economic stimulus will be required if we do not act decisively now. To avoid an epidemic bounce back not all stimulus will be invested in new growth – this extra investment will cause a tailing downturn in economic growth unless managed aggressively upfront.
Conclusion – Our current public health system response is insufficient by a factor of 2.5x. COVID 19 will cause an economic decline of 5.6T$ over the next 6 months. At the time I am writing this, Congress has allocated $8B to adjust the original 2020 budget that cut $1.35B of CDC and other pandemic response and vaccine monies and $100B for testing, food, sick leave, unemployment, health worker protection and sick leave. A total of $108B at the Federal level vs 4.3T required to enable a rapid economic bounce-back. The Senate rejected the first round of 1-2T$ of stimulus today. The House did pass a stimulus bill or $2.2T. We will survive this epidemic, the journey will rough or smooth depending on our health (slow ,unprepared) and economic (slow, insufficient) responses. The level of health and economic policy response is only about 35% of what it needs to be to avoid high increases in fatality and permanent economic damage due to the COVID 19 outbreak. I hope this analysis helps change policy fast…
Please spread the word – COVID 19 is not hype.
Fred Brown is COO of Fred Brown Management Consultants. View his resume at https://www.linkedin.com/in/frederickwkbrown/
To view a video interview with Fred, click on https://youtu.be/AeWlHfr0Tww