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Economic Research Note

Following the herd in COVID-19 exit strategies

Severe economic and social shutdowns are effective in stopping the COVID-19 epidemic

But the economic and social pain is significant, and herd immunity is not being built

Exit strategies should aim at protecting those most vulnerable, while letting everyone else get back to work

The presumed aim of public policy in the face of COVID-19 should be to allow the development of herd immunity while minimizing the pressure on healthcare systems, deaths, the economy, and social welfare as the development of a vaccine proceeds. The current policy of extensive shutdowns of economic and social activity is focused on minimizing pressure on healthcare systems and COVID-19 related deaths, but with massive repercussions on the economy (huge declines in GDP and huge increases in unemployment) and social welfare (health outside COVID-19, mental health, domestic violence). It also slows the development of herd immunity as the extensive shutdown measures have limited infection rates and thus the buildup of immunity in the population.

As countries furthest ahead in the epidemic turn toward exit strategies, planning appears focused on the gradual easing of restrictions and then seeing how it goes. If nothing untoward happens then more restrictions are eased. The problem with this approach is that it will open up the economy and society slowly, and that there will need to be repeated moves to calibrate restrictions as the epidemic ebbs and flows. A potentially better approach would be to consciously focus on age- and morbidity-related restrictions. Hospitalization and deaths are strongly related to age and co-morbidities. If mixing between the elderly and the less vulnerable younger populations can be sufficiently reduced, the economy and society can get back to work quickly, herd immunity can build, and the health care system as well as the old and vulnerable can be protected.

Follow the herd

Unless the virus mutates in a benign direction, the global population will have to reach herd immunity. Herd immunity refers to the proportion of the susceptible population that needs to have immunity in order to stop an epidemic. Herd immunity is achieved either by vaccination or by people catching the disease and recovering. With a basic reproduction number—the number of secondary infections from each infected individual before any changes in behavior R 0 —of 2.5, herd immunity requires 60% of the susceptible population to have acquired immunity. The latest estimates suggest a vaccine for COVID-19 is 12 to 18 months away, so the only way for herd immunity to be reached in the meantime is through infection and recovery.

To contain the epidemic, the effective reproduction number R e —the number of secondary infections from each infected individual after changes in behavior—has to fall to one or below. Given the dynamic of the epidemic around the world, this looks to have happened in China, other parts of Asia, and Western Europe. It is likely that additional changes in behavior will be needed in other parts of the world, such as the US, Latin America, and Africa before the epidemic is contained on a global basis. The epidemic can be contained—that is, R e at or below one—by extensive economic and social shutdown measures. But these measures cannot be sustained for long, so countries furthest ahead in the epidemic curve are turning their attention to exit strategies.

Table 1: Gauging acquired immunity in the UK Approach Estimate of acquired immunity, % of total population Estimate of acquired immunity, millions True death rate, % Imperial College 3.3 2.2 0.6 Broad based COVID-19 testing 7.5 5.0 0.2 COVID-19 symptom tracker app 9.8 6.5 0.2 Antibody testing - Denmark 2.7 1.8 0.7 Antibody testing - Germany 14.0 9.3 0.1 Antibody testing - Scotland 1.2 0.8 1.5 Average 6.4 4.3 0.6 Source: J.P. Morgan; S. Flaxman et al., Estimating the number of infections and the impact of non-pharmaceutical interventions on COVID-19 in 11 European countries, Imperial College, 30 March 20; T. Spector, COVID symptom Tracker, access here: https://covid.joinzoe.com/data, Kings College London, 2020; M. Cembalest, Equity rally and herd immunity, J.P. Morgan, 13 April 20

Unfortunately, the current level of immunity in the population is not known. A wide variety of approaches suggest that around 6% of the population in Europe have acquired immunity through infection and recovery (Table 1). This may well also be the case in other parts of the world. However, on its own this is a long way from full herd immunity, but it does reduce R e from 2.5 to 2.35. As acquired immunity increases this will put further downward pressure on R e , but this will be a very gradual process with restrictive measures in place. In order to keep R e at or below one, restrictive measures will be needed even if at a less intense level than seen thus far. Exit strategies involve governments making decisions about what sort of measures are needed to keep R e at or below one while easing the pressure on the economy and social welfare, allowing the buildup of immunity, while also limiting pressure on healthcare systems and mortality.

China lessons thus far

Recent experience in China suggests that the R e can be kept below one by basic hygiene (hand washing, wearing masks, wearing gloves, etc.), surveillance of people’s health to diagnose infections (especially frequent temperature checks), isolation of positive cases, and extensive contact tracing using CCTV, facial recognition technology, and mobile phones (social media and credit cards). Anyone who has the infection has to quarantine for seven days, while anyone who has had close contact with an infected individual has to quarantine for 14 days. Given the long incubation period from infection to symptoms, contact tracing has to stretch back over 14 days. In addition, asymptomatic individuals with COVID-19 will fall through the net. Nevertheless, early signs suggest the Chinese approach is sufficient to keep R e below one. The economic benefits are easy to see. The easing of restrictions in China has allowed economic activity to recover from around 60% of normal in February to around 80%-90% of normal currently.

Table 2: Deaths by age group in Italy Absolute number of deaths Age groups Men % of male deaths Women % of female deaths Total deaths % of total death ≤ 9 0 0 1 0 1 0.01 10-19 0 0 0 0 0 0.00 20-29 5 0 2 0 7 0.04 30-39 25 0 11 0 36 0.2 40-49 114 1 39 1 153 0.9 50-59 504 5 134 2 638 3.8 60-69 1533 14 424 8 1957 11.8 70-79 3972 36 1394 25 5366 32.2 80-89 4260 38 2451 45 6711 40.3 ≥ 90 762 7 1022 19 1784 10.7 Source: J.P. Morgan; L. Palmieri et al., Characteristics of COVID-19 patients dying in Italy, COVID-19 Surveillance Group, Apr 2020 - Report is based on available data on April 9, 2020

Not many other countries in the world will be able to follow the Chinese example. But there are still ways to ease restrictions while still keeping R e at or below one. Perhaps the optimal strategy would be widespread testing, both to isolate infected individuals and to identify those that have acquired immunity. Those who are infected, and their contacts, go into quarantine, while those that have acquired immunity can have full freedom of movement because they can no longer be infectious. Others, who are neither infected nor immune, have greater freedom of movement than currently but not as much as those with immunity. This optimal policy does not look likely however due to limited testing abilities, both for COVID-19 and for its antibodies. To be effective on a global basis, billions of tests would be needed. This is unlikely.

Perhaps the second-best policy—as well as maintaining social distancing wherever possible, wearing masks and gloves, and limiting large gatherings—is to have restrictions on freedom of movement determined by age and morbidity. It is quite clear that the old, and those with particular morbidities, are much more vulnerable than the young and healthy. An analysis of all Italian deaths from COVID-19 infections through April 9 (16,654 individuals) shows that 95% of deaths occurred in individuals aged 60 or over and 83% occurred in individuals aged 70 or over (Table 2). The mean age of patients dying of COVID-19 in Italy was 78 years old. What’s more, 96.5% of deaths occurred in individuals with co-morbidities—mostly heart disease, hypertension, diabetes, and chronic renal failure—and notably 61% of deaths occurred in individuals with three or more co-morbidities.

A study in China indicates that hospitalization rates are also influenced by age. In a study of 3,665 COVID-19 cases, there were virtually no hospitalizations for those aged under 19 (Table 3). For those aged 20 to 29 the hospitalization rate was 1%. Hospitalization rates gradually increased to reach 16.6% for those aged 70 to 79, and 18.4% for those aged 80 or over.

Table 3: Hospital admission rates for COVID-19 cases in China Age Hospitalization rate, % of cases 10-19 0.04 20-29 1.0 30-39 3.4 40-49 4.3 50-59 8.2 60-69 11.8 70-79 16.6 ≥ 80 18.4 Source: J.P. Morgan; R. Verity, et al., Estimates of the severity of coronavirus disease 2019: a model-based analysis, Lancet Infect. Dis., 30 March 20

If exit strategies are based on scientific evidence, then age-and morbidity-related restrictions will need to be put in place. As long there is limited interaction between those aged 60 or above, and those with relevant co-morbidities and the rest of the population, this should allow economic activity to recover, social welfare to improve, herd immunity to increase while also limiting pressure on healthcare systems and fatalities.

It doesn’t seem that governments are thinking along these lines, although academics in the UK have published a report recently suggesting that younger people should be allowed to go back to work because they are less vulnerable. This paper suggested that these individuals should be those aged 20-30 not living with their parents. But this seems too restrictive. It is true that in Italy only 0.05% of deaths from COVID-19 occurred in individuals aged 29 or less, but the death rate only rises dramatically for individuals over 60 years old. Only 5% of COVID-19 deaths in Italy occurred in individuals aged between 30 and 59. Similarly for hospitalization rates these only rise dramatically for individuals aged over 60.

If restrictions were eased on all individuals aged below 60, and without any relevant co-morbidities, and if those above 60, and those with relevant co-morbidities, continued with the limits on free movement that are currently in place, then the public authorities can limit pressure on healthcare systems and deaths while allowing significant parts of the economy and social system to quickly return to something closer to normality. Importantly, age- and morbidity-related restrictions would allow a rapid return of economic activity and a rapid buildup of herd immunity among the young. This may ultimately protect the old, and those with morbidities, more quickly than the arrival of a vaccine. This strikes us as a pretty good second-best policy in the absence of an ability to test widely. It is not perfect, but it may be the least bad outcome.