Only Way To Defeat Virus Is To Self-Isolate: Former Medicare Head

a bunch of pushback given the lack of testing. Andrew Cuomo, governor of New York State, saying the hospitalization rate for the coronavirus in New York State is fifteen to nineteen percent. He was arguing for more capacity for hospital beds for ventilators, and he was talking about the incredible strain it's going to put on the healthcare ses. To me, the United States joining US now is Andy Slavitt, former Acting Administrator for Medicare and Medicaid Services. No one better to have

a frontline view on exactly how strained this could potentially be. Andy, I want to first get your idea, get your thoughts on that fifteen hospitalization rate. People are pushing back and saying that's sensational considering the fact that so many people haven't been tested. Do you think that it is an accurate reflection of just how dire this virus is when

it does affect people and they do develop symptoms. So everybody is going to be hearing all sorts of data, and we should all appreciate the fact that this is a novel virus. It hasn't been with us for that long, and every data is a piece of dated only a data point, and so over time will have I think reliable forms of data. But if you listen to this data, I think we should be closer to UM. I wouldn't say anybody should panic, but we should be closer to

panic than we should be to calm. On the scale of one to ten, Uh, we should be at an eight. We shouldn't be. So I tend to say every piece of data that I see, UM, I want to understand it and assume the channel until proven otherwise. Because in this environment where you're where we have no immune system for this virus, where a number of people have underlying medical conditions, where we have a number of seers who did whom this is a lethal condition. Better to be safe.

And if we're wrong, and if the turns out to be um, hallelujah, someone can go back and criticize the people who said eighteen percent later. But I certainly, I certainly would rather behave on the much more cautious side. So Andy, just broadly defined, can you give us your sense of kind of how you think our U s healthcare system is prepared for what could be a surge in patients uh, from this virus. So we're not prepared.

But but let me put that in context. Um. You know that that expression, um they didn't build the church for for Easter Sunday as one that comes to mind. Um, you know if we built hospitals in New York eight times the size, uh, then we would be um. You know, we know that wouldn't make a lot of sense. But there are places where we should be better prepared, things like surge capacity, the ability to bring hospitals, UM, ships, equipment,

UM safety gear. Um. You know we should have been had we should have had much higher stockpiles of that. I will tell you that those recommendations have been strongly made in certain quarters for a long long time, UM, and I think dismissed um candidly by this administration. Although I'm not trying to take a shot at them. I

think it's just a fact um uh. But but I will also tell you that even if we had prepared UM, I still believe, even if we were better prepared, the scope of the virus as such that I think we

still would have been overwhelmed. So we're going to see a lot of parts of our hospital system understrain, most particularly the people who work in the healthcare system on the front line, who I think are are really going to end up in our real heroes in all of this, because they are going to be operating often without a playbook, UM, seeing a lot of things that is that are contagious, without without the best protective gear at times, because our

supplies are running running low, and and they're going to be overwhelmed. And that group of people that I think we really have to demonstrate an immense amount of gratitude for because they're really going to be the ones that are going to have to help us get through this andy. One other thing that Governor Cuomo said was that he expects the virus to peak in New York State in forty five days, which seems like quite a long time

from now for it to peak. Can you give us a sense of if that is the case, what the scope of cases could potentially be in whether asking Americans to stay home actually will help alleviate that or at least mitigate that. So it's really interes interesting. Uh. You you all of course have heard all of these expressions flattened the curve, right, all of America is becoming familiar with that expressions. Exactly. It's it's trending, and it's trending.

Maybe there should be clothing lines called flattening your curves or something. But oh lord, exactly, we're gonna go all kinds of fun places with this virus. We're going to have to have some humerum in my opinion. But um, the the the truth is the implication of that means we would rather it actually take longer then have it shorter. Uh. And I know that that's a weird thing to get her hands around, because that means that the social disruption,

the economic disruption, we'll go on for longer. But if we if we socially isolate um, we will reduce the number of cases to your prior question that the health care system has to handle. But it will also mean that this is going to go on for our longer a longer period of time. Uh and uh and and and we should be okay with that because we will be able to build immunity to the virus eventually, UM have some herd immunity, eventually have some uhum drugs that

can combat it. But um it only it will only work. The only way it works is if people socially isolate. And I hate that expression because I don't want people to socially isolate. I want people to physically isolate. But it only works if people hashtag stay home or if you first day the ft home as is I've seen trend to get on Twitter. That's the most important thing people can do right now. Andy, how about the testing.

Where are we in terms of getting test kits broadly disseminated across the country so we can really start getting accurate count as to the scope of this. Well, candidly, we're well behind where we should be. UM. You know the we had our first case the day as South Korea and their tests their tests were available ten days prior to that first test. And we are. So we're roughly a month or more behind where we need to be. And now I believe we're doing all of the right

things to ramp up production. I think you'll see production double uh and test double across the country this week. Um, And I think that's a good thing. Um, It'll will still be well short if you look at a per capita basis for the rest of the world, will still be in the last place. And then I will say this, Um, we will see I suspect we'll see a bump, but we will our supply chain with things that allow us to do these tests, because it's not just a cute swab.

There's a bunch of things you need in the lab, re agents and machines and so forth. Those supplies are in demand across the world and there's only so many of them and they can only be made so fast. So I suspect we will have a surge in tests and that will be a good news. But I think they will then becoming shorts supply again. Andy, just talking

about hashtag flatten the curve and hashtags stay. They have home um and all the sort of social media presence you know, there's sort of sort of gallows humor out there, people coming up with innovative ways to pass the time in their homes as they isolate. But there's also talk about arise and anxiety and a and arise and sort

of uh, this feeling of fear. And you said, you know, on the scale from panic to panic panic, Well, I mean, how can you can you give people a sense of Well, perhaps if people take it really seriously, it won't have to be the catastrophe that you're saying. Well, look, this will end, this will end, We will get through this the and we will have a period in our lives that will always look back on that will be um, you know, will days, will it be ninety days, will

let be underneated? Well, well well we don't know that now, but we'll know that, um, and we will always look back. Uh, so it will, it will be over. We should just be thinking about this is every life lost, just like every life life lost to the flu or a hard condition. Um, we should try to prevent so. UM. That means some sacrifice, That means staying in, That means doing some things differently. That means and I and with that comes from anxiety,

financial anxiety, social anxiety. UM, all of those things, and it's it's okay to to feel those things because the future is uncertain while we're in it, right, we will get through this. We're gonna have to leave it there. I could speak with you often and thank you so much for taking the time. Really appreciate it. Andy Slavitt, former Acting Administrator for Medicare and Medicaid Services, talking about

the situation facing the healthcare sector. This is bloomberg as we look at the potential for a peak in New York State, one of the most heavily affected regions by coronavirus spread UH in forty five days. That's alw long time. It's a long disruption, disruptive period, and I'm wondering on the market implications. This is the unknown and a lot of people trying to game out when it's time to

start getting back in as as people watch. Marcus Whipsaw and Peter Sheer has been watching it and he's been doing an incredible job really monitoring not only the macro but also the micro from Academy Securities ahead of macro strategy. Peter, where are you in terms of the risk off field that we've had in markets? The worst day in the SMP yesterday. Since seven, are we getting close to peak panic here? Yeah? So I like getting risk on Friday

ahead of the president. We clearly rallied in the weekends, told off and are lower than that. Now I would be adding a little bit of risk here, but I caution people. I think it's really a bet on DC coming through with a very large stimulus program, probably in the trillion dollar stimulus program, and maybe a side bet that we make progress against the VIRU as fast than people expect. So interesting, Peter, So, I think we had the FED come in in a big way over the weekend.

What did you make of that? And you think, Uh, the Fed is doing all that it needs to do here to try to stabilize markets. You know, I think the FED missed getting the commercial paper facility out on Sunday. Um, you know they've announced it today. One of my experiences with the financial crisis was that they offer, not just the FED, but politicians everyone would kind of miss deadlines. They would try and put in a firebreak, and once the fire had gone past that, the break did no good.

So I think we have to act more aggressively and be ahead of the things because I think market and economic psychology kicks in and being just a little late sometimes it's almost as bad as doing nothing at all. And just to give you a little bit more detailed, the commercial paper facility is going to be that the Federal Reserve is arranging will be backed by ten billion

dollars from the try sury departments. It will be ten billion dollars of credit protection UH for this facility in order to lower the short term costs for companies looking

to access the commercial paper market. I'm wondering, Peter. One thing that you've done a really good job of is looking at the technicles underpinning this, and a lot of people are trying to figure out how much we're seeing just mass unwindes of risk are funds of other leverage strategies, hedge funds, you know, is that really what has been driving the activity that we've been seeing. I think it was a big part of last week. Um, you know.

I think this risk parity type strategy, which ranges from the more sophisticated like a Bridgewater who uses commodities, stocks and bonds, to less of this data ones where people just own stocks versus bonds, they were getting hit. I think we are either done or very close to the end of that selling pressure coming from those funds, and those are bad because they're kind of like hitting these

sell everything button. They get forced to sell stocks, bonds, and commodities, so it feels like when you're in the end of that. The thing I'm watching most closely right now is one to three year corporate bond paper. And you know, I think in golf they say, you know, you drive for show and you put for dough. To me, it's that short end that's really critical because that's what

people rely on for financing. That's to me why it was so important that the FED gets this commercial paper facility up and running, that they're getting banks to board at the discount window again to alleviate pressure at that front end, because that's really where you know, it's really exciting to talk about where the long dated bonds are, but problems there are really really scary to me, and

I think they can be addressed and they're being addressed. Peter, are you seeing any capitulation in the market right now or is it just too early? You know, we saw some capitulation I think last week, um and it was a bit encouraging again on Friday, where you saw things like the high yield market and leverage loan market not get dragged around quite as badly by the stock market.

Right now we're back to everything being hit hard again, everything moving in tandem UM, credit spreads moving much wider as stocks struggle. Having said that, there's a bunch of new issues out today on the investment grade corporate bond market. If those can get placed, I think it's going to show that there is this kind of cash on the sidelines.

Everyone's just waiting. But as a whole, you are really making a bet right now that DC is going to get its act together, because I am afraid if DC doesn't get its act together, we have a very different situation that financial crisis, because to me, this is a bottom up problem, and it's going to be small businesses and individuals losing their income because they're doing what they're

being told to by the government. And if that's not replaced, I think that trickles up very quickly as people don't make rent payments, don't do this. And you know, we all look at that underemployment rate UM as well as the unemployment rate. I think that underemployment rate could sky rocket to financial crisis levels in a matter of weeks if government doesn't act. Hey, Peter, we really appreciate your thoughts.

Peter to your ahead of macro strategies at Academy Securities calling us on the phone giving us his thoughts here Lisa,

and thank you. It's really an issue you. I think Peter really makes a good point there right at the end, which is, uh, you know, despite that what we're hearing from Governor Cuomo about what's going on in the Tri State area, really do need potentially, I think to what the markets are telling us is a federal stimulus plan uh to really um, you know, really address some of the economic uh you know, issues that small businesses, medium

sized businesses are forcing. I also think it's interesting, he pinpointed, the Exxon and Verizon issuance is coming to the investment grade cripon market. It really it'll be interesting to see how those issuances go, particularly for Exon and given the fact that they were downgraded yesterday and the price of oil is falling off a cliff, so it's an interesting time to refinance. But Verizon also coming to market interesting

to see. I mean, there's a lot of cash supposedly waiting to buy this stuff, although we've seen some massive outflows record from here we have, and you know, it's just you know, a lot of stock. What I am amazed at as you look at yesterday's trading, a lot of stock was trading down at those levels. So you know, a lot of activity in the marketplace, a lot of volume in the marketplace. Uh. You wonder if this is kind of setting some type of stabilization, some type of

floor we will see going forward. This is Bloomberg. We are talking about China. That's one thing John mentioned that that Blimber Economics just downgraded its expectations for the growth and it's not that surprising giving the given the dismal numbers we got over the weekend out of China, which raises a question about supply chains and just getting the materials that companies in the United States and elsewhere in the world need in order to produce and sell their products.

Joining us now, Gorang shows Strey, Managing director Mergers and Acquisitions in Business services focused on logistics and transportation for Lincoln International. Gorong, I'd love to start with just how vast the disruption has been given the shutdowns that we saw in China earlier this year. How disruptive has that been to the supply chain? Sure, and it's certainly had a profound impact on the global supply chain here in particular in the first few months the year, and certainly

remains an involving in dynamic situation here. Uh. You know, it really did start over worries about sourcing product from China as they were forced to shut down production, particularly here in the US, as many of our manufacturers have a significant amount of exposure to Chinese productions. Backed percent of the Fortune On companies have Tier one suppliers that

are supplying parts directly into the US manufacturing process. And you know, even more worrisome is virtually all of the Fortune one companies are sourcing or have Tier two suppliers, all based in affected areas of China. I think, you know, at least for the first couple of months of the year, most US companies were able to get by here with a lot of the buffer stock that they had pre bought and anticipation of a slowdown that typically occurs with

the Chinese New Year. I think what's been a little bit more worrisome is that as China came back from the holidays here, there's been some challenges really over the past few weeks um to really get goods out of the country. So production is starting to slowly restart in the country, but they're having challenges finding truck drivers and getting through a lot of the height and levels of

screening that are required to get these products overseas. And certainly it's not just those suppliers and manufacturers that are looking for Finnish goods from from China, but also those that are sourcing components that are required in production. So now worries are over what does future production capacity look like here in the US as well as globally here if you can't get certain critical components that you're sourcing

from China. So I think this is really highlighted the fact for many companies that were already re examining their supply chains given the trade wars, do we need to figure out alternate supplies outside of China going to other countries like Vietnam, or in Europe, going more near sourcing to Eastern Europe, or even in the US re re

igniting efforts to source products from Mexico. So I think this will only heighten the level of attention that's being put on making sure you have redundancy in the supply chain and moving away from the reliance in China so go wrong. How about here in the U. S. It's very early days of trying of kind of this country of coming to grips with the virus and and shutting

down in certain cities. Give us a sense of kind of how the logistics set up here in the US may play out from the I'm thinking the trucking companies, railroads, what's the status there? Sure? Sure? And I think look, fortunately, um, thus far we have been fairly resilient here, and you know, there's been a lot of panic in terms of going out there and stocking up UH inventories that you know, in terms of household goods. But um, I think the longer term where here is, if this is more pervasive,

it's going to have an impact on unemployment here. You know, if you look at the ports on the West coast, for example, at the Port of Long Beach here, if we start to see a prolonged shutdown, there's gonna be millions of jobs at risk here if there's less cargo that's coming across through those ports. We've had fourteen months of consecutive declines and the shipments that are coming in from overseas, and that is going to continue here for

most estimates here. And what that means is, you know, as many as one out of nine people that are kind of in those jobs at the ports will potentially lose their jobs here. But then thinking about some of the more critical supply chains that we need, including pharmaceuticals and other electronics that may be going into healthcare equipment, I think there's heightened efforts here in the US to

make sure that those supply chains remain unimpacted here. So we are optimistic that that will be the case here, And certainly it's getting a lot more attention than it was getting here three or four weeks ago, when everyone's attention was just not can we get product out of China? Now, let's really let's make sure our domestic supply chains remain

intact as well. Drawing Shot Street, thanks so much for joining us to really appreciate your thoughts growing as a managing director and head of Lincoln International's North American logistics. Let's bring in Max mess and he covers all things healthcare related by Bloomberg Opinion and Max. I want to start with that hospitalization rate of fifteen to nine percent. I mean, is that an accurate kind of of of rate or is it possible to actually know given the

fact that there isn't that widespread of testing. UM, you know that that that rate is a little bit separate from the testing it in the sense that these are you know, the number of cases that they actually see that UM you know that that need to to actually be admitted, that need that more intensive care, and that that's not so far outside of the sort of range of numbers we've seen in other countries UM, you know,

like like China and Italy. UM. You know this this is a disease that is genuinely serious for for significant subsets of the population, both the elderly UM and people that are immunocompromised without other conditions. You know, they they have the potential of developed pneumonia. They will have trouble breathing UM if they develop a bad case of this. So there will be a significant portion of people that we see that that are going to need to be hospitals.

Part of the reason that that rate is the way it is, it's also that a lot of people to get the virus our cannon should stay home and that that's really important for you know, making sure that we're not overwhelming hospitals and um, you know, not not putting

undue strain. You know that these these people working in the rs already are working under a lot of stress, um and their their attention and beds should be devoted to people that that really needed, so we can hopefully, you know, keep if the hospital position rate is high, bad thing, because those are the cases we're That means we're seeing the cases that we need to see as opposed to the majority of young and comparatively healthy people that even if they get the virus, it's not all

that essential that they run to treatment neuron to get that they should monitor their symptoms, but the what they should be doing is just staying home. So max I was just mentioned to Lisa that the Governor Cuomo's really putting a lot of focus on the hospitalization and the potential scarcity of beds and hospital workers and the capacity

of the hospital system. Are you hearing that from other parts of the country or other leaders, um, you know, it's something that you hear constantly from people who study health policy and study epidemics. This is the the most important thing. That's the swing point of this epidemic is

avoiding overwhelming hospitals. When you have too many people for the number of beds and ventilators, something that we're seeing in Italy, you end up having to ration them to devoting those resources to the people that are most likely to survive. That's not a choice that we want to

be making in America. That we want to force America to make force doctors to if we want to have the capacity to give everybody the best possible treatment and the best possible chance of making it through, the only way to do that is to slow the rate of infection um so that we aren't getting so many cases that we will get that that kind of overwhelming growth

that will be to toil overams. So yeah, that that's absolutely the crucial issue and the fundament the thing that all polishy all policy is and should be addressed at at conbuiding Max Dison, thank you so much for being with us. I'm sure we'll be hearing more from you throughout the days and weeks ahead. Max Niece and Bloomberg Opinion Calumness covering all things healthcare. Thanks for listening to

the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa abram Woy. It's I'm on Twitter at Lisa A. Bramwoit's one before the podcast. You can always catch us worldwide. I'm Bloomberg Radio