How much is an Australian life worth to the economy?
It’s a question Australians would dread to ever ask but government decisions on whether to fund health interventions are commonly based on assessments of whether the health gains justify the additional taxpayers costs.
Reported job losses suggest around 29% of government spending on COVID-19 is being paid out to support the accommodation and food services industry during COVID-19, according to a new article in The Conversation.
That’s about $3.4 billion per week. Bars and restaurants are likely to account for half of it, $1.7 billion per week.
The Conversation co-author, Flinders University Health Economics Professor Jonathan Karnon, says the government would be $600 million better off per week if it reopens bars and restaurants but Australians should expect 4.8 extra COVID-19 deaths if they’re opened this week.
“Because the average age of people dying due to COVID-19 is around 80 years, and each might have around 10 more years to live, the number of life years per week that would be lost as a result of the $600 million per week the government saved would be 48,” says Professor Karnon in The Conversation.
“It suggests each life year saved as a result of keeping bars and restaurants closed costs around $12.5 million. When we weigh these costs by their probabilities we get expected costs to the government from reopening of $1.1 billion, compared to costs from keeping bars and restaurants closed for another week of $1.7 billion.”
As a ballpark figure, new health measures are funded by government if they gain an additional life year at a cost of around $50,000.
“This suggests that by keeping bars and restaurants closed the government is paying 250 times more than it would usually pay to gain a life year.”
A separate guideline used by Australian governments to assess regulations and infrastructure projects puts the value of a statistical life year at $200,389 in today’s dollars.
“This suggests that by keeping bars and restaurants closed the government is paying 60 times more than it would usually pay to save a life. It’s why we think governments should reopen them, next week. Like all such analyses, ours depends on the assumptions used.”
The researchers, Professor Karnon and Monash University Professor Ben Mol, have put a spreadsheet of our decision tree online to allow readers to experiment with different ones.
“Our analysis leaves much out. It includes neither the negative impact of COVID-19 on people’s quality of life, nor the negative impact of shutting bars and restaurants on people’s health and quality of life,” they say.
“It gives us an indication of how many life years the government is saving for the $600 million per week it is costing it to keep bars and restaurants closed.
“It suggests the government could save many more life years by spending the money in a different way.”
‘Should we re-open pubs next week? The benefits seem to exceed the costs’ by Flinders University Professor Jonathan Karnon and Monash University Professor Ben Mol was published in The Conversation on 11 May 2020.