Pandemic could cost hundreds of billions of dollars
Pandemic could cost hundreds of billions of dollars
The 1918 influenza epidemic was the most serious epidemic the United States has known, leavings hundreds of thousands of people dead and millions infected with a highly contagious flu virus. As the nation struggles to prepare for a potential future pandemic flu outbreak, Federal Reserve Bank of St. Louis assistant vice president Thomas Garrett has looked back at 1918 to see what lessons can be learned about the likely impact of the next pandemic.
In his report, Mr. Garrett finds that society as a whole recovered quickly from the 1918 influenza, although those who were directly affected had their lives changed forever. And, he says, given our highly mobile and connected society, a new influenza pandemic is likely to be more severe in its reach and perhaps in its virulence than the 1918 attack, despite our health care improvements in the last 90 years.
According to Mr. Garrett, the potential financial costs and death tolls from a modern-day pandemic in the United States suggest an initial cost of several hundred billion dollars and the deaths of hundreds of thousands to several million people. Lessons learned from the 1918 pandemic can be used, he says, to formulate a list of the likely economic effects of a modern-day flu pandemic and possible ways to mitigate its severity.
Given the positive correlation between population density and influenza mortalities, cities are likely to have greater mortality rates than rural areas, according to Mr. Garrett's analysis. Compared with 1918, however, urban and rural areas are more connected today, which may decrease the difference in mortality rates between cities and rural areas. Similarly, a greater percentage of the U.S. population now is considered urban (about 79%), compared with 51% of the population in 1920.
Taken as a whole, nonwhite groups have a greater chance of death because some 90% of all nonwhites live in urban areas, compared with about 75% of whites. That statistic correlates with lower-income individuals being more likely to die. Nonwhite households (excluding Asians) have a lower median income than white households. And while only 10% of whites were below the poverty level in 2005, more than 20% of various minority groups other than Asians were living in poverty.
Can free-service providers cope?
Urban dwellers are likely to have, on average, better physical access to quality health care, although that advantage is tempered by the fact that nearly 19% of U.S. city dwellers have no health coverage, compared with only 14% of the rural population. Mr. Garrett says questions remain on the affordability of health care and whether free-service health care providers, clinics, and emergency departments would be able to handle pandemic victims.
Health care is irrelevant, Mr. Garrett says, unless there are systems in place to ensure that a flu pandemic does not incapacitate the health care system and prevent rapid disposal of the dead, as he says it did in Philadelphia in 1918, exacerbated by medical leaves during World War I. If medical staff members succumb to the flu and facilities are overwhelmed, the duration and severity of a pandemic will be increased. He notes that in Philadelphia, for example, it was reported that during the 1918 pandemic "the city morgue had as many as 10 times as many bodies as coffins."
A greater percentage of families with life insurance would mitigate the financial effects from the loss of a family's primary breadwinner. But life insurance is positively correlated with income, so low-income families are less likely to be protected with insurance than are higher-income families.
Mr. Garrett says local quarantines would likely hurt businesses in the short run. Employees likely would be laid off. And even families with no contact with the influenza could experience financial hardships.
Small businesses could suffer revenue losses of more than 50% while others, such as those providing health services and products, could experience an increase in business unless there is a full quarantine. If the pandemic causes a shortage of employees, there could be a temporary increase in wages for remaining employees in some industries. However, Mr. Garrett says this is less likely now than it was in 1918 given the greater mobility of workers that exists today.
Mr. Garrett questions the degree to which the American people can rely on local, state, and federal governments to help in a modern-day pandemic. "Government has shown its inability to coordinate some disasters in the past," he says. "Governmental decision at the time of the 1918 influenza also had unfortunate consequences. In fact, the decision of local officials in Philadelphia to proceed with a Liberty Bond parade during the pandemic significantly increased mortality rates. Nearly 20,000 people gathered together in downtown Philadelphia for the event. Days later, influenza mortality rates in Philadelphia soared, making it one of the hardest-hit cities during the pandemic. Officials in St. Louis (a comparable city to Philadelphia at the time), however, responded quickly to the influenza by closing nearly all public places as soon as the influenza had reached the city. As a result, influenza mortality rates were much lower than in Philadelphia."
Mr. Garrett finds that an important difference between 1918 and now is that we now have the Centers for Disease Control and similar organizations in other countries that monitor outbreaks of disease, send teams to identify and isolate diseases, and coordinate responses. We also have national flu vaccination programs and funding.
The question that remains, he says, is whether all of this is adequate in the event of a pandemic. Although federal, state, and local governments have started to focus on preparedness in recent years, he believes it is fair to say that progress has been slow, especially in local governments.
According to Mr. Garrett, the key to mitigating a pandemic is the successful cooperation and planning of all levels of government, something that has not always occurred in the past. "Although we are certainly more prepared for an influenza pandemic now than in 1918," he says, "there should still be concern about government's readiness and ability to protect citizens from a pandemic."
Download Mr. Garrett's report "Economic Effects of the 1918 Influenza Pandemic: Implications for a Modern-Day Pandemic" at: http://liber8.stlouisfed.org/newsletter/2008/200802.pdf.The 1918 influenza epidemic was the most serious epidemic the United States has known, leavings hundreds of thousands of people dead and millions infected with a highly contagious flu virus.
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