Maybe pet health care is not seeing as much cost inflation as we thought

Nationwide’s pet health insurance division has partnered with Purdue University researchers to track trends in pet insurance payouts. The researchers track a “basket” of the most commonly-utilized procedures to see how the typical veterinary visit has changed in price over time. According to their research, these ordinary expenses declined by 6 percent from January 2009 to December 2017 after adjusting for inflation.

This decrease is corroborated by less reliable sources, such as the American Pet Products Association (APPA) annual consumer spending surveys. For virtually every year tracked (accessible via web archive), cat and dog owners reported spending less money on average routine and surgical visits. The data is jumpier than the Nationwide and Purdue rigorous analysis of 30 million insurance claims but confirms an interesting – and counterintuitive – trend.  In a system where consumers and patients’ “representatives” have enough skin in the game, healthcare prices behave like they would in most other markets.

That is from Ross Marchand, “Why cats pay a lower price for CAT scans.”  Here is earlier work by Einav, Finkelstein, and Gupta about pet health care being about as inefficient as human health care.  I don’t consider this a settled issue, but it is interesting to hear a revision on what had been the most common take.

Comments

I long for the day when economists stop using the CPI as a deflator. It gives significantly warped results. This isn't some kind of quackery, it's something taught to undergrads in any worthwhile principles of macro course. It's lazy and indefensible.

I have a pet cuckoo that needed a checkup. The vet flat out refused saying "No cucks allowed!" and slammed the door on us.

Surely this is the sort of thing that people should expect to cover from savings rather than insurance?

Vets have had to innovate, since some of their revenue streams have been chipped away by online competitors, e.g. chewy.com

The study found that veterinary prices were stagnant during the great recession (2009-2014) and then spiked afterward (2015-17) by over 10% offsetting the earlier period, and that prices continue to rise. They aren't exactly pets, but during the great recession abandoned horses were an enormous problem down here where I have a home, horses being a very expensive "pet" to maintain. I just returned from an unplanned "vacation" and can report that the economic recovery has reached places that were stagnant both before and during the great recession, "recovery" not adequate to describe what has happened, with expensive restaurants, hotels, boutiques, and other markers of affluence. I met a woman whose former husband (they recently divorced) is a vet with multiple offices and who resides in what most would describe as a mansion and in his leisure time invests in restaurants among other businesses. This in a place that had an unemployment rate of 25% to 30% during the depths of the great recession. This is Trump country, where vets are millionaires and ordinary folks live in new luxury housing and drive BMWs and Mercedes and actually pay for very expensive surgery for the family dog. [An aside, I took my Boykin Spaniel to her vet several months ago because she had an ear issue (Boykins have floppy ears) and the vet recommended I have her teeth cleaned. The price? $600. I gave her a dog bone instead.]

"ordinary folks ... drive BMWs and Mercedes": mugs. Japanese and Korean cars are much better built.

Veterinarian here.

Like many businesses, the successful owner is going to be much better off than even the most skilled practitioner. Most vets are poor business people. The trend is towards more investor groups buying up the local clinics and hospitals.

My impression is that for standard procedures, prices rise slowly or stagnate. Vaccinations, routine surgery, preventive health, etc.

If you want your family dog to get the same basic care as the dog you had growing up, prices are going to be very reasonable and affordable.

If you want your dog to get advanced dental care, ultrasounds, chemotherapy, etc prices are probably rising more in line with human medicine.

I've found it interesting that in human medicine, there often isn't the option of taking the price conscious approach. When I had to go to the hospital for an appendectomy, I got good care for a high price. I wasn't offered the option of saving some money by, for example, sharing my hospital room with another patient.

You essentially received the medical standard of care for a relatively low risk procedure. Assuming you are a low risk patient as well. So 'frills' or not, single room or not, the total costs should be very predictable. You say they were high. I would ask what you paid, what your hospital billed, and what your insurance paid. These days insurance discounts can be marked. For instance my wife's Obamacare pays about 1/3 of billings.

I think I see what you're saying, and yes with pretty good insurance my out of pocket cost was pretty reasonable. Without insurance or with the insurance I have today? That would be very painful. Good thing there is no sign so far of my appendix growing back. But whether or not insurance covered a lot of it, these are still growing costs going into healthcare, yes? I was suggesting some major differences for why veterinary care costs do not seem to be rising as fast as medical costs - more options for the client, the ability to give less than state-of-the-art care, less liability are some of the first ones that come to mind.

A lot of the "no frills" options are more costly unless everyone is doing it. When the nursing ratios for a floor are already set by union contract, the cost savings just are not there to get money from spitting a room. We would either have to assign another nurse for the extra patient on the floor, or leave a full room empty.

Regardless, we now have an outlier for work floor. E.g. if your hospital uses geographic wards somebody is a patient over cap or your various healthcare workers (physician, nurses, RT, ST, OT, PT, etc.) have to cover off their area. Breaking routine has a much higher error rate (e.g. the off-floor RT is late for breathing treatments, you tank and get intubated) and those can be costly (e.g. if the hospital is at fault for some types of errors, nobody pays for the resulting care and the hospital eats the full costs).

In the simplest terms, the cheap options become a lot less cheap you try to do them only for one patient. If nothing else, you would need to have another patient willing to share rooms to even make a dent towards savings.

My experience with veterinary medicine is that liability is nowhere near as high so process mistakes are vastly cheaper and less of a concern.

In general, the more options a hospital has for care options, the more chances for error and hence liability. Assembly line medicine is soul sucking and dehumanizing ... but excellent at reducing risk.

Sure, good points and mostly agree here. A lot of veterinary offices are able to cater to the "no frills" clients, and the demand is pretty high for this even in wealthy areas. It sure does helps to have less liability issues, and a lot less regulation to be able to flexibly offer more options.

Wasn't being critical of my hospital, just noting that when the customer has no choices, prices are likely going to be higher.

"I wasn't offered the option of saving some money by, for example, sharing my hospital room with another patient."

Nor the option of "being put down".

Do even half of pets die naturally?

How many pets fatally injured by a vehicle actually die "naturally" instead of being euthanized.

That's a little extreme to equate less frills with being put down. But is your point that I am considering taking lower quality care for lower cost? Would I accept a 0.01% increase in the chances of a serious complication to save $1. Nope. To save $10,000? Now, I may have to think about that.

Or is your point that many pets do not rack up big hospital bills because the owner elects euthanasia? Yes, I'd agree that is a big factor which probably contains the measure of veterinary costs. And while I'm completely against euthanasia in virtually all cases for humans, it is worth considering how long and hard I would personally fight a terminal illness with drugs or treatments that are not well proven to help promote quality or quantity of life in any significant way. I'd never impose my own choices on others, but I've seen enough human and animal illness to know how I'd like to spend my final days.

If the pet is fatally injured, then yes euthanasia is usually the way to go. Do you mean if they are seriously injured, and extraordinary care could save them? You'd be surprised how many people and organizations will do what it takes to recover those pets. Not all of course, but give my profession a little credit ;)

I didn't know people had health insurance for their pets (except for thoroughbred horses, perhaps). It was alluded to by another commenter, but in health care for people the billing rate and the collection rate are very different, the former higher (often much higher) than the latter. The amount collected for an insured patient is the rate agreed to by the insurer and the provider, with the patient having no input in the matter. That's not to say the provider would prefer a patient without insurance: collecting from an uninsured patient is problematic. My point is that insurers have a moderating influence on rates. Or that's the argument. Most insurance rates are a function of the Medicare rate; thus, if Medicare rates are stagnant, so are insurance reimbursement rates. Since there's nothing comparable for pets, how are reimbursement rates for vets determined?

"The amount collected for an insured patient is the rate agreed to by the insurer and the provider, with the patient having no input in the matter."

That is a GOP/conservative idea that is unique to the US since the 90s as a counter to HMOs, real HMOs not "HMO insurance plans".

This runs counter to free market (capitalism) theory because the market is highly restricted.

Ie, the patient cant shop around for the best price-performance because the listed provider for 3rd best might be $1500 compared to best provider at $1000 but your insurer cut a deal with 3rd best at $950 and the best is out of network are will be reimbursed at 80% so you pay $200 after the insurer pays $800 instead of $950 for in network 3rd best.

The insurer makes more return on investment with higher cost care, eg only 80% of premiums must go to providers so the 20% is bigger the more paid to providers.

HMOs are a group of doctors getting paid a fixed amount per patient, eg a global budget, so doctors allocate resources to maximize results. Hiring more nurses and record keepers, and similar specialists and automation, to get people vaccinated, keep them taking prescriptions, track data to see trends. HMOs face a make/buy choice on hospitals, cancer treatment, etc, usually buying unless the number of patients is such a high portion of the population the HMO is the hospital's only customer. Smaller groups mitigate random walk risk by buying reinsurance so two cancer patients instead of the one patient per 5000 expected does not break the budget.

For vets, most dog/cat insurance works by the client paying the entire bill upfront, and then submitting a reimbursement claim to their insurance to get all or some of their costs back. Some companies will do a co-pay, some will cover all costs up to a point. None, that I am aware of, will cover pre-existing conditions, and they can be pretty tough on how widely they interpret that. Caveat here is that I have no knowledge of insurance for horses, which being so expensive are probably a different animal altogether (no pun intended).

When I'm treating a patient, I rarely if ever consider insurance or lack thereof, and usually it won't affect my bottom line. The exception will be if I'm going to give a treatment option that will be expensive (surgery, specialist referral, days of hospitalization) I will suggest that the client call their insurance company in advance and explain what is happening so they have some sense about whether the costs are going to be covered or not. For some people, that answer will determine whether they go with a high cost or low cost approach.

Much of that $600 is for the anaesthesia.

I had the suspicion that dogs get better healthcare than Americans.

Dogs are deserving of better everything than most Americans.

My 'modest proposal' for solving U.S. healthcare cost problems would be an executive order allowing vets to treat humans. We'd still get better care than what was provided by human MDs when I was a kid and at a fraction of the price.

I think the answer is here:

"a “basket” of the most commonly-utilized procedures"

For extant procedures we would expect to decline in price over time. Same would be true for human health care too. What happens to hte price of vet or human health care though is that we continue to find new things we can do.

Not holding 100% to that model but I'd argue it pretty strongly.

+1 Dental cleanings are usually very cheap, but if they find a cavity....

The other big thing to remember is that a lot of the costs for old school medicine were dead weight losses. Being laid up in the hospital for a few days may be cheaper than paying for a bunch of laproscopic equipment ... but losing an extra week's worth of income (either you or your firm) was worth a lot.

Similarly, radiation therapy has gotten a lot better not because we kill more cancers, but because we now use all matter of hideously expensive technology to shape the field that allows you to get on with more of your life during treatment. We have ever more patients who elect to work through five or six weeks of radiation treatment.

Or there is the fact that we now do chain dialysis strategies. Peritoneal dialysis port placement is one surgery at some annoying cost, but it buys months or years where you can travel and enjoy life. Eventually it either fails or you get the kidney transplant. In the former case we then do a second surgery to create the superior AV fistula that will let dialysis continue until death or transplant. We have added a lot of cost instead of going directly to the fistula ... but we also suck up less of your life for a while.

The old methods typically meant that people had longer times to heal, longer times to wait before treatment, and decreased quality of life on the other side. We have literally cut the average length of hospital stay in half and are still around 60% or less of European hospital stays. Yet somehow giving people back days of their lives is never given a benefit value in these analyses.

Good point! It seems that few people discuss all the benefits and added values we do get from expensive HC. Including more days and years of quality life, productivity and family security. I just think that not enough people discussing this stuff have (yet) lived through the experience.

Remember, remember the 7th of September.

Famous Brazilian painting portraying the country' Declaration of Independence Ceremony.

https://pt.m.wikipedia.org/wiki/Independ%C3%AAncia_ou_Morte_(Pedro_Am%C3%A9rico)#/media/Ficheiro%3AIndepend%C3%AAncia_ou_Morte_(1888).jpg

It is a very beautiful painting. American painters lack such skill.

I will respond, also. Since I am a totally different person irl than those two. I concur. A most beautiful painting!

I think that is the impersonator.

Who is he impersonating?

Mr. Ribeiro

Who is impersonating Brian Jordan?

Cucks like me! That's who!

This is impossible to measure. It i want to prove that the prices have increased i would take an older dog to a vet and say yes to everything. If i wanted to prove that process were flat i would survey prices for specific procedures.

Vet costs are what people can afford. If they get too high they will have difficulty collecting.

There is a trend in the industry towards chain ownership. There are people buying up practices.

This isn't hard. The number of yearly veterinary graduates increased from 2500 in 2003 to 4000 in 2014.

https://www.thebalancecareers.com/are-there-too-many-veterinarians-125548

Such was life in Obama's America.

Through Bandfield at PetSmart, I get free consultations, all preventative care and a teeth cleaning for a few hundred a year. Compare with when I was a kid, every vet visit was a couple hundred bucks just for seeing the vet. I’d call that decreased relative prices.

Would love to see something similar for people without insurance. Young and healthy don’t need to see a person let alone a doctor...most illnesses are treatable with rest or an antibiotic. No marginal cost needed for routine preventative evaluation or to tell someone to take an ibuprofen or to take an antibiotic...should be easily handled by computers if regulation allows.

This makes me think of this:
I grew up with some shady people who would steal from large organisations but would never think of stealing from an individual. Maybe that's a human thing that extends to MD's and hospitals etc. In fact maybe GP's would shop for price for their patients if they knew that their patients where paying out of pocket.

Comments for this post are closed