Questions which are rarely asked

by on July 13, 2009 at 4:12 pm in Medicine | Permalink

Today it is from Megan McArdle:

Veterinary spending is rising just about in line with human medical
spending.  Kudoes to AEI for publishing a graph that seriously
undercuts one of the major conservative arguments about health care: 
that the main problem is consumers who don't bear their own costs. 
Veterinary spending is subject to few of the perversities that either
left or right suppose to be the main problems afflicting health care
spending.  Consumers pay full frieght most of the time.  They are price
sensitive, and will let the patient die if keeping him alive costs too
much.  There is no adverse selection.  There is no free riding on
mandatory care.  Government regulation is minimal.  Malpractice suits
are minimal, and have low payouts.  So why is vet spending rising along
with human spending?

There is a very nice graph in the post.

1 JackTrade July 13, 2009 at 4:35 pm

As a dog guy, McArdle’s description of appropriate previous generation veterinary care for cats is spot on.

But seriously, I’d also be interested in seeing what the geographic distribution of pet ownership looks like, then and now. I’d have to imagine there’s greater urban/suburban density of pet ownership compared to previously, and with it, more access to medical technology, opportunities to spend, etc.

2 Andrew July 13, 2009 at 4:42 pm

Cost DRIVERS for both are the same. They are growing as new procedures become available. A 200x fold difference between human and animal costs seems problematic for proving that the cost LIMITERS (3rd party payer) are the same for both. We also haven’t seen the data for 2008/2009.

3 Jeff Yager July 13, 2009 at 5:05 pm

I’m going to throw out a guess. The entry costs to becoming a doctor and a vet are roughly the same, are they not? Medical schools and vet schools are both expensive and hard to get into. Could it be that we’re making the entry opportunity into these fields too high?

4 Floccina July 13, 2009 at 5:12 pm

I have a few friends who are dog owners who drop big dollars on treating their dogs. I find it shocking the way they treat their dogs, to me there is a huge gulf between man and beast and if your dog gets a serious disease you put him down. I know a guy who spent way more than he could afford on his dog and the dog died anyway and you could not talk sense to him or he would get very hostile. I guess to each his own.

5 Floccina July 13, 2009 at 5:16 pm

I want the Kevorkian of vets for my dogs.

6 Leigh Caldwell July 13, 2009 at 5:27 pm

Surely the result actually supports the argument that “the main problem is consumers who don’t bear their own costs”?

I never knew a dog to pay – or even copay – for its own shots.

7 Patrick July 13, 2009 at 5:33 pm

So people complain about the number of Americans without healthcare and then go and buy their dogs Prozac.

Sounds like I need an income tax increase (or some Prozac)….

8 Drew F July 13, 2009 at 5:39 pm

LOOK AT THE SCALE OF A GRAPH BEFORE YOU POST IT!

9 Colin July 13, 2009 at 5:44 pm

HOLY MISUSE OF STATISTICS, BATMAN!!!!!!!

Vet costs when from $4.25 to $11B.
Human costs when from $800B to $2100B.

The only thing significant is that they’re both “linear,” both increasing, and roughly the same percentage of increase (~2.5x). Beyond that you got nothing of value.

How many things could you plot overtime that haven’t increased in the last 22 years? From what I can find gas was a bit under a buck in the mid 80’s. Today it’s $2.25 in my area. A 2.5x price jump! Wow! Cost of gas and health care have gone up about the same!

CPI in 1986 was 110 and in 2006 it was 202. Wow, it almost doubled!

Sorry to sound so…sarcastic, but seriously. There are so many variables that could drive this that I don’t see how you can pull anything *meaningful* from it. Simplest being population changes, as already pointed out.

10 babar July 13, 2009 at 6:13 pm

what dataset would let me compare gdp per dog in various countries and eras? thx.

11 deriuqer July 13, 2009 at 6:21 pm

Hmm… The price of apples is rising in line with the price of oranges…

12 Anon123 July 13, 2009 at 7:32 pm

This would be right in line with Robin Hanson’s view that medical spending is mostly about signaling. As we become wealthier, we have to keep spending more and more money (i.e., waste more and more) on the signal for the signal to remain legitimate.

Medical care signals that we care about others. Keeping pets (as discussed in Miller’s Spent) has a lot to do with signaling, too.

13 Phil July 13, 2009 at 8:21 pm

Wasn’t McArdle just cited as a new linertarian luminary? Neither, I think.

14 anony July 13, 2009 at 9:45 pm

In Erroll Morris’s old documentary about a family that owns a pet cemetary (Heaven’s Gate I think is the name), one pet cemetary owners says that the demand for pet cemetaries was increasing because of the birth control pill, which has ultimately led to an increased demand for pets – both for couples who delayed parenting by several years, and adopted a pet as a surrogate for a few years, but also grandparents who had to delay being grandparents longer and so had a pet. So two dogs for every one baby delayed. That of course wouldn’t explain rising vet medical costs, but I’ve always loved that guy’s observation.

15 Phil July 13, 2009 at 9:49 pm

The differing slopes of the two data series are not relevant because slope is not the correct parameter for describing the growth of medical costs. Health care expenses are not a linearly increasing function of time (i.e. C=rxt). Costs increase exponentially with time (C=Kxe^(t/T)). The relevant parameter to compare the two times series is the percentage growth rate, given by the e-folding time, T, which, as you can see from the graph, is the same for both veterinary and (human) health care costs. If you plotted costs for a longer time (i.e. over the whole 20th century), this would be visually more obvious.

16 Akshay July 14, 2009 at 12:42 am

There is a slight difference here, though. Aggregate human healtcare expenditure is rising, but if we look at the data, I’m fairly sure that we will find that most of the additional expenditure is on more elective procedures for generally older people. What we are concerned about, I think, is that everyone has access to basic healthcare facilities– so for things like bullet wounds and fractures, there should be a relatively cheap way of taking care of the stuff. I think that aggregate vet expenditure could be rising simply because there are a heck of a lot more pets (the pet-industry is very fast growing, faster than the increase in the human population, particularly in developed countries).

17 joan July 14, 2009 at 3:33 am

The correlation between people and pet care expenditures would not look nearly as impressive if the numbers had been adjusted for inflation which increased prices by a factor of 2 since 1984. It is hard to be sure but it looks as if inflation adjusted spending on pets declines during recession. Such graphs are frequently presented by people who do not know any better, but when someone trained in economics does, I assume that they have an agenda other than increasing the understanding of the public.

18 Tracy W July 14, 2009 at 5:47 am

The number of pets doesn’t change what I take to be the key argument – that healthcare spending is not being driven by consumers not bearing their own costs. If vet care spending has gone up because people now have four pets where they had two before then that equally shows that people, overall, are willing to spend an increasing chunk of their family income on their pets’ healthcare.

19 John Dewey July 14, 2009 at 9:16 am

Tracy W: “then that equally shows that people, overall, are willing to spend an increasing chunk of their family income on their pets’ healthcare.”

I think that’s correct, Tracy.

Real U.S. per capita disposable income has nearly doubled the past 30 years – rising from $16K to $28K. Consumers are going to spend that extra income on something. That they have chosen to spend more on their own medical care and on their pets is not surprising. The medical care industry and the pet care industry have responded to the increased demand, but perhaps not fast enough to keep real equilibrium prices at yesterday’s levels. So we have seen increases in medical care and pet care consumption as well as increases in medical and pet care prices.

I see nothing wrong with consumers electing to demand more health care and pet care. But I am starting to realize that government intervention has prevented supply from meeting that demand.

20 John Dewey July 14, 2009 at 10:58 am

Colin: “So, 12% more spending per pet, vs 38% per human in the same time frame, so much for cost control.

I don’t think this post was just about price inflation but about overall spending increases. I agree we need to adjust for population growth, but not pet population growth. It’s humans who are spending the money. Shouldn’t the proper comparison be:

growth in pet care spending per human
to
growth in medical care spending per human?

How did you derive the $10.5b veterinary spending for 2007? The upward sloping line appears to be at $11.2B for 2006.

21 Andrew July 14, 2009 at 11:14 am

Under Obama care, you won’t be able to get a new kidney, but to soften the blow they will be handing out hypoallergenic puppies.

22 Jacqueline July 14, 2009 at 12:59 pm

FYI, you can buy pet health insurance. Our dogs have better health insurance than we do. 🙂

23 spencer July 14, 2009 at 5:23 pm

Spending on Vets also includes spending by commercial operations on farm animals –pigs, cows, chickens. Is it possible to break this data out on pets vs food animals?

24 Gloria July 15, 2009 at 4:18 pm

Just speaking for myself here- I don’t have health insurance since I’m a freelancer working on my own, so I don’t go for unnecessary medical care for myself. I have contacts and am going to the eye doctor for that for the first time in a few years this month.

However, I have an older dog and I want her to live as long as possible. I spent well over $1,000 last January for her to have two teeth cleanings and 7 teeth removed- meanwhile, I’m putting off braces for myself that I would like to have but don’t need! I figure my dog will only be alive a certain amount of time and I’d like to extend that as much as possible. I can wait.

The pet owners spending those amounts on their dogs’ healthcare are operating from a lot of parameters: many kids, for instance, would be devastated if the family dog dies. Many people see their pets as their own children.

Credit cards also help with this– previously, if you couldn’t afford the cash payment right then you would have to take a loan.

25 Falstaff July 16, 2009 at 11:50 pm

Jim Manzi at NRO draws attention to a large oversight in the Biggs Veterinary services figures that changes things dramatically: they do not account for the large increase in pet population in the US over that period. He shows the _per_capita_ increase per US pet is 6% from ’01 to ’07, while human medical expenses increased 40% over the same period, again pointing to insurance, third party payments as the culprit.
http://corner.nationalreview.com/post/?q=YmFmOTRjMWJlOTM1Y2YxYzMzMWIyNjdkZTFjM2Y3ZWQ=

26 Betty July 24, 2009 at 9:41 am

I recently came across your blog and have been reading along. I thought I would leave my first comment. I don’t know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.

Betty

http://smallpet.info

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