Arnold Kling  

Pet Health Care Theories

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Andrew Biggs writes,


The chart below shows spending on veterinary care, which I pulled from the Consumer Expenditure Survey, and national health expenditures (for people) from the National Income and Product Accounts. Two things are interesting here: first, the rate of growth of spending from 1984 to 2006 wasn't all that different--and in both cases, spending grew faster than the rate of economic growth. As new technologies are developed for humans, we adopt them for Bowser and Fifi

Megan McArdle comments,

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?

If the consumer is the pet, then the consumer is definitely not paying full freight. I blame third-party payments!

I should point out that Robin Hanson has published a theory that easily could explain the growth of both types of health care.

Longtime readers of this blog know that I am not such a fan of pets. About a month ago a woman allowed her dog to run across the bike path just as I was approaching on my bike, forcing me to slam on my brakes and fall--fortunately, no broken bones, just a lot of bleeding and a bruise that took two weeks to heal. As I turned around and walked my bike home, the golden retriever had a big smile on its face, and its owner was scarcely more remorseful.

There is no "we" that spends too much on vet care. Individual owners make the decisions. Whether those decisions are foolish or wise is none of my business. As long as we don't have government-funded pet health insurance, then I don't care if the owners spend a fortune on veterinarians. Serves them right, as far as I'm concerned.

But with human medical care, we spend each others' money, and that is the problem. The Democrats insist that "we" should share even more of our health care expenses. And then they will turn around and complain about how much "we" spend.

UPDATE: You would not believe the number of bloggers commenting on this issue. Jim Manzi has the most interesting analysis--he also adjusts for growth in the pet population.


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TRACKBACKS (2 to date)
TrackBack URL: http://econlog.econlib.org/mt/mt-tb.cgi/2065
The author at RSSted Development in a related article titled Have veterinary costs grown with human health care costs? writes:
    Arnold Kling gets to the bottom of the veterinary v. human health care spending comparison very quickly: If the consumer is the pet, then the consumer is definitely not paying full freight. I blame third-party payments! I’m surprised no one call... [Tracked on July 14, 2009 2:08 AM]
The author at Enemy of the State in a related article titled Humans vs Pets writes:
    [...]So to conclude, it is misleading to compare human health care with pet health care and claim that is proof that humans bear the costs because the rate of spending is in line with that of pets. The structure of both systems are entirely different. ... [Tracked on July 14, 2009 4:33 PM]
COMMENTS (15 to date)
John Jenkins writes:

When I looked at that table, I noticed something a little strange: the highest number on the pet scale is six times the lowest and the highest number on the human scale is five times the lowest.

Those numbers are on the same point on the Y axis, so it seems to me that there is a problem with the comparative scales.

Grant writes:

Is there evidence that our additional spending on veterinary care has no or very little marginal gains? That is after all the whole problem with health care spending: we are spending more money but not getting anything for it.

If new technology allows greater pet care, and people have more disposable income, we might expect more spending from rational individuals.

Without reporting on the marginal gains of this additional spending, I don't see how we can say anything about veterinary vs. health care spending?

Patrick writes:

@John Jenkins:

Both healthcare costs and veterinarian costs have increased by ~280%.

RL writes:

I assume Arnold is joking. I think it specious to argue that the fact pet owners rather than the pets themselves pay for pet health care is in any way analogous to third-party payments. One might as well say that even if paid for out of pocket, pediatric medicine necessarily involves third-party payment since the child doesn't pay the money out of his own earnings.

In a perverse sense, this might be good news. It raises the possibility that using other people's money is not driving up health care costs by as much as might have otherwise been thought. Perhaps our society is sufficiently rich that we would voluntarily pay something approximating what we currently pay even if we paid it out of pocket.

This in turn would raise the possibility that other countries, via intervention in the medical marketplace, are systematically underpaying for health care, providing less care than people would naturally pay on their own (albeit, they are less wealthy societies than the USA).

Bob writes:

Government pet healthcare service, now that would be funny. I have seen people spend 1000s on exotic treatments for their pets such as chiropractics and electro therapies.

Bill writes:

Before I would draw any conclusions from this, I would want to know the per-capita data (per-caPETa?).

A cursory googling didn't turn up a historical trend in pet ownership, but I'd be willing to bet that over the period in question - in which disposable income grew - you wold find increasing numbers of pets per capita in this country; meaning more vet costs. I'm sure it wouldn't eliminate the upward trend on vet spending, but would flatten it.

Higher disposable income would also lead to people opting for treatments they may not have in the past.

lame writes:

@patrick: check your math. both numbers are far under 200% change.

RE writes:

Arnold! How can you not like dogs!?

I can understand being upset by an irresponsible owner given your accident, but it sounds like your dislike began a long time ago.

You are my favorite economist and normally so wise, but I have a hard rule of distrusting anyone who does not like animals (esp. dogs).

Sad day.

Tracy W writes:

Bill - why would knowing per capita pets make a difference? People who spend $250 each on four pets' healthcare in a year are devoting as much of their disposable income to pet vet care as if they had one pet and spent $1000 a year on it's healthcare.

gnat writes:

All things equal, you would expect pet expenditures to grow faster. According to BLS the mean salary for a veterinarian is about $75,000. http://www.bls.gov/oes/current/oes_29he.htm)

and Physician’s income varies from $150,000-$400,000K depending on specialty http://www.bls.gov/oco/ocos074.htm


Justin Ross writes:

It seems to me that the far more relevant comparison is plastic and laser eye surgery on humans, rather than vet expenditures.

With vet expenditures, I'd want to know if quality and price has fallen, even if total expenditures has been increasing. After all, a graph of computer expenditures would look pretty similar.

Andrew Biggs writes:

Arnold,

Thanks for the link. I agree with Bill that you'd want to see the per capita (per canine, etc.) data, which doesn't seem to be available. Moreover, you have changes in the composition of the pet population that make comparisons hard. The broader point was simply that even in a totally free market -- sadly, veterinary care is about as close to a free health care market we can find -- you're going to find rising spending over time due to technology and income effects.

The key issue, as I tried to point out, is that the levels of spending are vastly different. Obviously most of this stems simply from the fact that we value humans more than pets (or at least most of us do -- PETA members, don't take offense). But things like the RAND study indicate that the level of spending may be independent of the growth rate of spending. In my opinion, our problems lie more in the level than the growth rate.

As for your dislike of pets, I can only pity a man who doesn't like a dog! Granted, the bike accident probably didn't help things.

Rick Stewart writes:

One question for Arnold -

Why did you brake?

Arnold Kling writes:

Rick,
Are you wondering why I didn't hit the dog?

a) it wasn't an option. The dog was on one side of the path, and the owner was on the other, with the leash in between. I braked to avoid hitting the leash, which probably would have sent me tumbling over the handlebars.

b) If I could have slammed into anyone on purpose, it would have been the owner. I don't hate dogs. I just think that the number of pets is out of control. One dog for every two hundred households sounds like a better ratio. But nobody appointed me pet czar.

pedro writes:

Don't ride on Bike Paths, the road is much safer.

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