Pandemic Takes 16 Trillion Out of Economy: Harvard Professor David Cutler Discusses His Research

David Cutler

[ Music ]

Marianne O’Hare: Welcome to Conversations on Health Care with Mark Masselli and
Margaret Flinter , a show where we speak to the top thought leaders
in health innovation , health policy , care delivery and the great m inds
who are shaping the health car e of the future. This week Mark and
Margaret speak with David Cutler, the Otto Eckstein Professor of
economics at Harvard , o ne of the key architects of major health
reform efforts from the Clinton Administration to the Massachusetts
Health Law to the Affor dable Care Act. He recently completed an
analysis for the Journal of the American Medical Association and
calculated the expected costs of the American economy from the
pandemic will be $16 trillion.

Lori Robertson also checks in , the Managing Editor of Fa ctCheck.org
she look s at misstatements spoken about health policy in the public
domain , separating the fake from the facts, and we end with a bright
idea t hat’s improving health and well being in everyday lives. If you
have comments please e - mail us at [email protected] or find us
on Facebook , Twitter , or wherever you listen to Podcast and you can
also hear us by asking Alexa to play the program. Now stay tuned for
our interview with renowned health economist , Ha rvard's David
Cutler here on Conversations on Health Care .

Mark Masselli: We're speaking today with David Cutler a renowned health
economist , an Otto Eckstein Professor of Economics at Harvard . Also
served at the Kennedy School of Government and the T . H . C han
School of Public Health. He's instrumental in crafting the health
reform effort under President Clinton, the Massachusetts Health Law
and the Affordable Care Act.

Margaret Flinter: Dr. Cutler has served on the Council of Economic Advisers, the
National Institutes of Health and the National Academy of Sciences.
He is the author of numerous books and articles, including Your
Money or Your Life: Strong Medicine for America's Health Care
System . And he was named by modern healthcare a s one of the 30
people to have a powerful impact on health care. Professor Cutler, we
welcome you back to Conversations on Health Care .

Professor Cutler : Thank you. It's great to be with you.

Mark Masselli: Yeah, you know, we enjoyed your piece in the Journal of American
Medical Association, co - written with your Harvard colleague,
La wrence Summers . We are really trying to calculate the projected
impact of the U.S. economy of the COVID - 19 pandemic , a nd I guess
it's fair to say the findings were pretty grim. You warn ed that based

David Cutler

o n the U.S. response to the pandemic or the lack thereof, the
pandemic could end up costing the US economy $16 trillion . I think
the GDP for 2020 is running to $ 21 trillion. So really a profound
impact. I wonder if you could tell our listeners what metrics you
looked at and how you arrived at your conclusion?

Professor Cutler: Yes, happy to. So it's noted, it's about 90% of one year's GDP. So it's a
huge number, there are two primary inputs to the calculation that we
made. The first one is what will be t he l o st output from the economy.
So there are various macroeconomic models that have been
developed over time that show what the economic output forecast is
likely to be. So we use models that were out there, in this case from
the Congressional Budget Office, which tends to be pretty middle of
the road on this.

And they estimate that it will be at least a decade before the economy
recovers, and that that will be roughly a trillion dollars of lost output
over that decade. So that's about half of the economic los s. The
second part of the economic loss is the loss from worsened health.
And that is an economic loss just as lost output is , that is lost output
means you don't have money to consume things . Lost health means
you don't enjoy life.

So we use a very common technique called valuing statistical lives to
measure the value of health impairment in three dimensions. One is
for people who die. So , we made a forecast of how many deaths there
would be by a year from now assuming that death rates remained at a
relati vely low rate of a few weeks ago rather than the new higher
rate. Second is we added in costs associated with suffering among
those who are -- who will survive COVID but have long term,
particularly respiratory and cardiac impairment. We've observed that
w ith SARS, people have survived SARS people survive acute
respiratory distress syndrome, and a variety of other conditions. And
then third is we took account of the populations mental health
impairment that is, roughly 40% of people in the country now are
r eporting symptoms of anxiety or depression. And that had been
about 10%. And so we said, look , that's 30% of adults who are now
reporting symptoms of anxiety or depression, we need to take
account of that . So we buil d in those three pieces , a nd that works out
to about $8 trillion in total as well. So the total gets to be about $16
trillion.

Margaret Flinter: Well, Professor Cutler I really appreciate your focusing on the very
real human cost of this pandemic , a nd I wonder if we could maybe
look at just one slice of it around the impact also on the institutions
t hat support people and the health care sys tem. Many considered our
health care expenditures are already unsustainable right before this.

David Cutler

Now we have 250,000 deaths, people who were cared for mostly in
h ospitals, millions of in fections, the testing, the treating , the vaccine
production. All of this adds up to anot her enormous load on our
health care system and its expenditures that will likely far surpass
anything we've done to - date, how do you see the hea lthcare system
being able to respond to these enormous increased demands for
expenditures, and at the same time, we also know they've had losses
of revenue that they used to be able to count down, so kind of a
double sword?

Professor Cutler: Yeah, it's ver y interesting, because if you look at the healthcare
industry, on net spending on medical care is actually lower this year
than it was last year and lower than it was in previous years. So for
the first time ever, we're likely to finish 2020, having spent less on
health care than the year before. And that's because the loss is, in
terms of people not showing up for medical care. In March,
particularly April, May, June, were so large, that they're greater than
the medical care costs that we've spent in terms of treating COVID
and preparing for this winter, and, and so forth. So the healthcare
industry is really being hit very hard on the one hand by lower
revenues, on the other hand, by increasing spending, on necessary
PP E , and so on. One of the ways that he althcare responded, which
was unprecedented for health care, was that in the spring and
summer, healthcare businesses laid off or furloughed, a number of
employees, and this almost never happen ed . Healthcare is virtually
immune to recessions a nd yet this p articular time, they really had no
choice but to let people go. So it was one of the leading causes of
unemployment, unemployment insurance in the spring and summer,
was the healthcare industry. Some o f that employment has recovered
but not all of it. And so there's employment in healthcare still below
where it was,

Mark Masselli: You know, I want to pull the thread a little on sort of your modeling.
And I think we can stipulate , and you have been very articulate on this
that a nationally coordinated initia tive of testing and contact tracing
would have saved 30 times the expenditure because it would have
been better contained. I'm wondering about the vaccine, because it's
in the news. Now, we've got two prominent candidates, others in the
pipeline as well. B oth have announced 95% efficacy rate. We've had
Dr. Fauci on the show, and a couple of times during the pandemic,
and I know the last time he was on, he was hoping for maybe 60, or
70%, would have been happy with 70% effectiveness. How does the
vaccine rol l into your model as well? And then certainly, I think the
blocking and tackling of testing and contact tracing. Also, I' d love to
hear your thoughts on?

Professor Cutler: Yeah, so the vaccine is a super welcome development, the 90 / 95%

David Cutler

effectiveness is jus t fantastic. So that is just terrific news for people .
One of the key questions is going to be, how quickly can we get the
vaccine to people and enough people so that people feel comfortable
going back out and doing the things that they were doing and so on?
Almost certainly , that's not going to be until spring , summer of next
year. So the forecast that we had done that said, you know, what, if
the economy remains depressed, and people remain fearful of the
virus through a year, that's probably about accur ate, hopefully, we
will have overestimated a little hopefully, it'll be sooner than that.

In the interim, the question is what to do. And in some ways, what
this does is it puts a lot more pressure to say, let's not hurry people
back to work now. Because e veryone who becomes ill and either di es
or has something bad happen to them just months before a vaccine is
available. It's just terrible . So it really puts a lot of pressure on saying,
let's figure out ways to keep people going but not expose them to
situ ations where, where the y are at a lot of risk. Whereas if you
thought you were going to have to live with it for a while, you know,
for a long - some number of years, you might say, Okay, I'm going to
ultimately have to get, you know, address it. So how do I think about
it then?

So I think this will --- this raises the value of things like testing so that
people can know whether they are positive or not, whether it's ---
whether they're at risk of passing the disease on to others or not,
contact tracing, an d especially isolation and quarantining. So that we
can really keep the virus as low as possible until we can get people
vaccinated.

Margaret Flinter: But Professor Cutler, I think, you know, from all your years of studying
research, you know, the flaws an d you know the strength s of the U.S.
healthcare system , a nd one of the weak points that we have been
focused on for so long is the issue of health disparities and inequity,
both in health and in healthcare , a nd certainly, it probably shouldn't
have come as a surprise to us during this pandemic, that people of
color, people who are marginalized economically have suffered
probably the hardest consequences in terms of illness and death, and
also the least likely to be insured and protected by leave fr om their
jobs and the like . Tell, tell us a little bit about your analysis of the
impact of the pandemic on vulnerable populations in particular, and
how you see where the health system has sort of risen to the occasion
where we fall short, what do we need to do be tter going forward?

Professor Cutler: Yes, so unfortunately, the pandemic like everything has exposed the
rifts in society between the haves and the have - nots, on the basis
partly of race, partly socio economic circumstance, partly of ethnicity,
partly of l iving arrangements, and so on. And so in some ways, the

David Cutler

pandemic is kind of awakening people to something that was always
there. I think the pandemic though, ha s also brought a couple of other
things of interest. One is, I think that probably the care for when
people become very ill with C OVID is relatively more similar b y , for
example, race, then is the care for say chronic disease. And so that's a
hopeful sign that suggests that the medical system may be moving in
a direction, which says, we are going to work together to not tolerate
a situation where care for some diseases is much better on the basis
of socioeconomic status or race than it is for other diseases and
hopefully COVID will invigorate our efforts to do that.

I also think that COVID is sort of showing us many of the social
structures that we're going to have to address if we're going to have
to address the broader issue of race and health. So for example,
people say, well , you know, if you just equalized access to medical
care . Well , for COVID, people have sort of equal access, but that
doesn't solve everything. And so , and so we're going to have to
address issues of housing and employment and living arrangements
and medical care access and a whole bunch of things rather than just
thinking about kind of one off kinds of policies that might , that were, I
think, some of the debate had been beforehand.

I also think that COVID will do one other thing, which is, you know,
that with infectious disease, of course, what your neighbor does
matters to you a lot more than with chronic disease. So if your
neighbor is obese, you can say, well , you know, look, that's my
neighbor, and I'm not responsible for my neighbor, therefore, I don't
really need to worry about his or her obesity related issues and so on.
On the other hand, their obesity now puts you at risk for them getting
COVID, and then an infectious disease and then passing it on to you.
And so, every city, every country, every state is going to have to think
about the fact that they're only as strong as the weakest link, you
know, so if I've got a group of people who are more likely to become
ill from something that others can then catch, that's a problem right
there in and of itself, I may not have wanted to deal with it, but I have
to deal with it. So the idea that infectious diseases are still with us,
makes us care a lot more about the health of others than if its , all just
chronic disease.

Mark Masselli: We're speaking today with David Cutler a renowned health
economist, an Otto Eckstein Professor of Economics at Harvard.
whose recent report in the Publication of JAMA predicts the pandemic
c ould cost America economy some $16 trillion. You know, professor,
I’m wonder ing if you could help us understand how untreated mental
illness exact s such a huge tol l on the economy and how you projected
that into your pandemic cost analysis. And I ask this because we
recently had Pulitzer Prize winners, Nicholas Kristof and his wife,

David Cutler

Sheryl WuDunn who joined us to talk about a book they had written
“ Tightrope ” , reall y pointing out the economic factors driving the rise
in suicide and overdoses of death , and you were talking about issues
that we're going to have to deal with , and housing is one , but
certainly the mental health disparity that we have in this country and
how much the COVID - 19 pandemic has raised the profile of our need
to really start thinking more holistically about how we provide mental
health services in this country?

Professor Cutler: Yes, so mental health, excuse me, mental health impairment has gone
up enormously since COVID, especially you can tell it's increased from
about 10% of the adult population to about 40% of the adult
population. And if you look, many hospitals are still low on the
number of patients coming in through emergency departments a nd
so on. With the exception of mental illness, which is increasing in
prevalence. And there's no sign that mental health is, has gotten any
less bad during COVID and the COVID recession than otherwise . It's
really, we're very poorly equipped as a country to deal with mental
health issues, and COVID is really exposing that. But we have a very
individualistic style, a sort of belief of kind of your own actions matter
more than social actions. And then when things don't go well, that
then tends to get blamed on individuals rather than on social factors.
So that contributes to the problem, combined with the fact that
historically, we've so under resourced the mental health sector, we've
underpaid, we've under done the number of mental health
professionals and s o on, that we don't have the capacity to treat
people. That's making it very difficult.

The good news such as there is, is that the mental health, mental
health provision has become enormously online , has gone
enormously online. So telemedicine has come in to mental health
more than any other area of medicine , and that is great news b ecause
getting to the mental health professional was always a big deal. And,
you know, the difficulties doing that, and all of that. So anything that
can be done to reduce the b urden on people who need mental health
care is great. The bad news is that we still don't have enough capacity
to treat everyone who needs it , a nd so that that remains a big
problem.

Margaret Flinter: Well, we would certainly agree with you that a silver l ining and it's
hard to talk about silver linings and a pandemic. But making
behavioral health services much more accessible through your phone,
or your computer has been a great step forward. But you know, we
see the impact on all the health disciplines, y our colleague, Dr. Koh
[PH] was with us recently. And he said, okay , another silver lining is
nobody knew what a public health worker was before. And now
everybody knows what public health is from the epidemiology to the

David Cutler

data scientists, people know where their local health department is,
and that those people actually go out and do things like contact
tracing. But we've seen the same with the public's recognition of who
are our frontline health care workers. And what do they do? You
know, not the televisio n series stuff. But really, what does that
emergency room physician , that ICU nurse do is now much better
known, we think to the American public? And I'm curious what you
think the impact of the pandemic, among its many impacts might be
on the healthcare w orkforce? As we go into the future, is it likely to
inspire more people to come into healthcare? Is that likely to change
some of our education and training models? Maybe more of a public
health focus ? What's your kind of future gaze on those issues?

Profe ssor Cutler: Yeah, you know, like everything else, I think it has a mixed impact. So
on the one hand, people are truly impressed as they should be with
the treatment sector. That is, you know, in the middle of a pandemic,
where their own lives are in dange r, people are going in to provide
treatment , a nd that's just amazing. And they're doing it under
incredibly difficult circumstances. And without adequate
reimbursement , without any times --- without appropriate adequate
protection and so on. On the other h and, you then, if you talk to
clinicians, or if you listen to conditions, there are quite a number who
are saying, you know, I'm feeling burned out, I may need to retire. I'm
not sure I can keep my practice open , because of the reduction in
revenues and th e increase in expenses. The telemedicine thing isn't
going so well because it's so difficult to do. I'm not sure I have the
infrastructure to make all this happen. I'm not sure I can manage
having children and practicing medical care at the same time and
s chools are not open and so on and so forth. So I think there is likely
to be a wave of even as we're celebrating medical professionals, we
may very well also have a wave of healthcare professionals retiring
and healthcare organizations merging with other o rganizations to get
out of the practice of medicine by themselves and all sorts of things
like that, that are likely to pu t a lot of strain on the health care system ,
strain on patients, not of course people are doing it not to create
strain, but just becau se that's, that's what has t o happen. So I think
that it's cutting both ways.

Mark Masselli: You know, I want to play with that thought for a moment , a nd I do
want to acknowledge that you did a great piece on Freakonomics
documentary, “ The Doctor Will Zoom You In Now . ” So there's sort of a
crisis, maybe there's an opportunity here, I think you're concerned
that the medical health industrial complex or whatever, it's just very
hard to move and whether or not telehealth can really be brought in
and bring abou t economies. But in that change, is there an
opportunity for some transformation to occur b ecause there were a
lot of things in flux, and we simply, we're going to have to do things in

David Cutler

a different way. Telehealth may be a force multiplier, it may not be.
B ut how do you think sort of broadly about the opportunities and the
concerns? Dou you think about is this an inflection point for the
health industry that might bring about some positive changes?

Professor Cutler: Yeah, of course, all crises create changes , some good , some bad. So
that's, so we shouldn't be surprised by that, you know, we before
COVID, we worried that the medical sector was too big, that it was
too institutionalized, that it was, you know, not effective at dealing
with people where they are and so on. And so hopefully, this can
cause a reset in some of that. That is, if we said, you know, why is our
goal when someone is sick, to bring them to the doctor, where we're,
by the way that can make other people be sick? Like, shouldn't our
first th ought be, let's treat them at home unless we absolutely cannot
treat them at home a nd then we need to see them, you know, sort of
things like that. Or, you know, why are we sending this person to post
acute care to a skilled nursing facility if they don't need it, if they can
be home.

So those kinds of changes would be very, very good. If they lasted, I
think some of it will depend on you know, what happens with the
reimbursement environment. And some of it will depend on whether
the providers can make the IT infrastructure work. But I could well
imagine a situation where a few years from now we say, you know, a
lot of that care never came back in person. And actually that's really
good. And we're saving our most intensive care for those patients
who really need the most intensive settings a nd that's great. That's
likely to involve less employment in health care, but it's --- but those
people are very skilled, and they can work in many other industries
and occupations as well. And we shouldn't spend any more o n health
care than we need to. So that so -- that's my hope is that some of this
will teach us how to survive in a smaller, more efficient healthcare
system.

Margaret Flinter: We've been speaking today with David Cutler, renowned health
economist and the O tto Eckstein Professor of Economics at Harvard,
you can follow his vitally important work by going to
scholar.harvard.edu / Cutler, or follow him on twitter @ Cutler _ econ.
David, we want to thank you for applying your keen intellect and
scholarly efforts towa rds the complex conundrum of the economics of
the American healthcare system and for joining us again on
Conversations on Health Care .

Professor Cutler: My pleasure, thank you.

[Music]

Mark Masselli: At Conversations on Health Care, we want our audience to be truly in

David Cutler

the know when it comes to the facts about health care reform and
policy. Lori Robertson is an award winning journalist and Managing
Editor of FactCheck.org, a nonpartisan, nonprofit consumer advocate
for voters that aim to reduce the level of d eception in U.S. politics.
Lori, what have you got for us this week?

Lori Robertson : Late in the presidential campaign, President Donald Trump claimed
that state COVID - 19 restrictions are a partisan ploy with the
Democratic governors purposely keeping thei r states closed while
Republican governors are opening them. But that doesn't square with
the facts. For instance, in Bullhead City, Arizona, just across the
border from Nevada, Trump wrongly contrasted the reopening
actions of both states. In that speech on October 28, the President
said “In Arizona you've opened up but Nevada, get your governor to
open up your state please. ” So by Trump's telling Arizona, which is run
by Republican governor Doug D ucey is opened up , but Nevada run by
democratic Governor St eve Sisolak is not , but the reality is both states
have very similar restrictions.

In late October in both Arizona and Nevada bars, restaurants, movie
theaters and gyms were all open but use was capped at 50% of
capacity. Jennifer Tolbert, Director of Stat e Health Reform at the
Kaiser Family Foundation confirmed to us that the two states were in
similar phases of reopening. In fact, Arizona has slightly tighter
restrictions in some areas. For example, large gatherings are limited
to 50 people in Arizona, bu t it is 250 in Nevada . Nevada is stricter than
Arizona in one respect. Nevada has a statewide facemask mandate
requiring people to wear them in public spaces when they come into
close contact with others, such as on public transportation or in a
business. Arizona does not have such a mandate and leaves it up to
local governments to impose them if they want. And that’s fact check
for this week. I'm Lori Robertson, Managing Editor of FactCheck.org.

[ Music ]

Margaret Flinter: F act C heck.org is committed to fact ual accuracy from the country's
major political players and is a project of the Annenberg Public Policy
Center at the University of Pennsylvania. If you have a fact that you'd
like checked, e - mail us at www.chcradio. com . We'll have
FactCheck.org’s Lori Robertson check it out for you here on
Conversations on Health Care.

[ Music ]

Margaret Flinter: Each week Conversations highlights a bright idea about how to make
wellness a part of our communities and everyday lives. D aniela Tudor
had a revelation a few years ago, waking up on the cold floor of a jail
cell, she could ask for help for her drug and alcohol addiction or she

David Cutler

could die. She chose the former . Tu do r then launched not only on her
own recovery journey but on a b roader quest to develop tools that
can help all people grappling with addiction recovery to avoid relapse,
which is so common, especially in the early days of sobriety, she
realized that there needed to be more readily accessible tools for
those in recover y to stay connected to their treatment goals. Beyond
the 12 step meetings and the talk therapy sessions,

Daniela Tudor : I am in long term recovery. And I went through a four - week inpatient
treatment program , where at the end of that four - week program, all I
received was a piece of paper that listed an enormous amount of
things I'm supposed to do on a daily and weekly basis for the rest of
my life to stay in recovery. And I knew that building something on our
cell phones that are with us, 24 /7 , would be a wa y to bridge that gap
and keep people accountable through an app to those activities.

Margaret Flinter: So she founded WEconnect a relapse prevention on the go mobile
application that can be downloaded on a smartphone. The platform is
designed to keep peopl e engaged in their recovery plan u sing daily
reminders and a reward system for when you perform the tasks that
are essential to recovery.

Daniela Tudor: The individual along with the support of our certified peer recovery
support specialists are able to in put those activities into the app. And
when it comes time for that activity to start, you simply check into it,
you see at the top of the app, how you're earning your incentives.
And by the way, this incentive program is based on evidence based
research ca lled contingency management. So it's actually proven to
show that it keeps people accountable to their recovery plans or their
care plans. The way that we've digitized it and the immediacy of that
incentive, keeps people accountable to checking into those activities
on the go.

Margaret Flinter: And the digital platform also allows everyone who's c onnected to the
person's health care ecosystem to see in real time activities that are
enhancing recovery. And also when one might be at higher risk for
relapse.

Da niela Tudor: We have trained peer recovery support specialists all across the
country , a nd they get to leverage a tool that we developed called a
data dashboard, where they can see in an instance if someone needs
additional support or outreach, and that is built through the app,
keeping them accountable to those activities and the peer having
insights on how they're staying accountable to those activities in real
time. So it really allows for this connection of support 24 /7 and
visibility so that when someo ne needs that added support, you know,
not days or weeks go by which is without this program is what
happens, but rather gives insight and gives the option for connection

David Cutler

in real time.

Margaret Flinter: Since the pandemic hit , Tu d or says the WEconnect plat form has been
a lifeline for those in recovery. Those now of ten cut off during the
shutdown.

Daniela Tudor: Actually , when the pandemic hit. Immediately, my heart went out for
a while none of us have support meetings to go to any more in
person. So we imme diately stood up with a set of partners, these
mutual aid meetings that are online that are led by certified peers.
And within just a couple months, over 200,000 people joined from all
states and several countries.

Margaret Flinter: WEconnect , a downloadab le app designed by people in recovery for
people in recovery to help maintain sobriety with a support system in
the palm of their hand, keeping them on track with health goals,
staying connected to a care team and avoiding relapse. Now that's a
bright idea .

[ Music ]

Marianne O’Hare: You've been listening to Conversations on Health Care.

Mark Masselli: I'm Mark Masselli.

Margaret Flinter: And I'm Margaret Flinter.

Mark Masselli: Peace and Health.

Marianne O’Hare : Conversations on Health Care is recorded at WE SU at Wesleyan
University, streaming live at www.chcradio.com , iTunes, or wherever
you listen to Podcasts. If you have comments, please e - mail us at
[email protected] , or fi nd us on Facebook or Twitter. We love
hearing from you. This show is brought to you by the Community
Health Center.

[ Music ]