THE ECONOMICS OF FLATTENING THE CURVE By
MAHA KHAN YIFAN MAO
“Flatten the curve.” This was the most widely emphasized message to the general public in mid-March before the peak of COVID-19 in the United States. The importance of flattening the curve is apparent when evaluating the capacity of the healthcare system in relation to the U.S. population. It is equally important to consider the economic reasons underlying the regulations that have led to this specific capacity level. The need to promote this message became clear throughout March as early estimates showed that about 4 million Americans would be infected by May 13. Given that there are 2.8 hospital beds per 1,000 Americans, it was obvious that there were not nearly enough physical beds let alone supplies and medical workers to care for the number of Americans projected to be hospi-
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talized from COVID-19 given data from China and Italy. The frightening discrepancy between the estimated number of Americans being infected and the capacity of the U.S. healthcare system drove public health officials to begin emphasizing the need to “flatten the curve” and follow social distancing guidelines. Although these measures are not expected to ensure that the U.S. healthcare system will be able to handle all COVID-19 cases, the effort will surely help reduce the amount of serious cases that are turned away or the rationing of medical resources between dying patients. The intersection of basic economics and the healthcare system is not usually discussed in news about the state of the U.S.’s “broken” healthcare system. However, just as in the financial
markets, there are certain key players and incentives to keep in mind when trying to understand the effects of the COVID-19 pandemic on the healthcare system. First, the healthcare system comprises 11% of the U.S.’s labor force, and spending on the healthcare sector makes up 24% of total government spending. Consumers in the healthcare system are patients, who reportedly spend 8.1% of consumer expenditures on healthcare, while the firms are hospitals, private practices, and payors. Although these economic actors play roles of different magnitudes in contributing to the capacity of the healthcare system, the most obvious predicted effect of COVID-19 on the healthcare system was the shortage of hospital beds. This shortage was directly caused by how our healthcare
