The chart comes from Andrew Biggs at the American Enterprise Institute Blog:
The same factors impact healthcare services for our pets. And unlike human healthcare, veterinary care has almost no government provision and very little insurance. In other words, almost all health spending on Fido is paid out of pocket.
And yet we continue to spend more.
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—because we can afford to and we think it’s worth it. I personally took my Alaskan Malamute to a Washington-area practice that was known as the “Mayo Clinic of veterinarians” —and I suspect this wasn’t because, like the real Mayo Clinic, it keeps costs low.
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?
Two reasons, presumably: technological change and rising income. As we get wealthier, we spend more of our income on former luxuries, like keeping our pets healthy–nineteenth century veterinary care for sick cats consisted of a sack and some stones to weight it down with. And improvements in health care technology are giving us more things to spend that money on. With the help of my family, I bought my dog five extra years of life with an MRI that diagnosed his slipped disk; without it, we’d have had to put him to sleep when he was three. Worth it? I think so. But in 1950, I couldn’t have afforded it, even if it had been available.
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.
Crucially, it seems clear to me that the numbers should at least be calculated in terms of per capita expenditures, since as it stands we aren’t shown how much of the total growth in each case is due to simple increases in human and non-human animal populations. And based on what I could glean from a quick search, the U.S. pet population increased by about 17% from 2001 to 2007 alone, which would give an annual growth rate of almost 3% in contrast to a U.S. population growth rate of about a third of that. Biggs’s graph (I couldn’t figure out how to dig his original data out from the Consumer Expenditure Survey) does suggest an increase in veterinary expenditures more on the order of 30% or so during that same stretch, so it’s clearly not as if there hasn’t been a notable increase in veterinary expenditures per pet, but not accounting for this sort of complicating factor seems a significant omission, no?
These data are consistent with what I wrote a couple years ago: “The reason that we spend more [on healthcare] than our grandparents did is not waste, fraud and abuse, but advances in medical technology and growth in incomes. Science has consistently found new ways to extend and improve our lives. Wonderful as they are, they do not come cheap. Fortunately, our incomes are growing, and it makes sense to spend this growing prosperity on better health.”
UPDATE: Matthew Yglesias:
But look at the Y axes. They don’t match up! This is almost a chart in which the same vertical distance that denotes a $2 billion increase in veterinary expenditures represents a $500 billion increase in human health care expenditures. But not quite. Note that the distance between $2,000 billion and $2,500 billion on the right axis is clearly larger than the distance between $10 billion and $12 billion on the left.
I’m not sure what difference cleaning the charts up would make, but it would certainly make them a lot easier to interpret. One would also want to do some kind of normalizing by population size. Has the number of pets grown relative to the number of people? Shrunk? We know that the demographics of the human population has been aging, but probably not the pet population.
UPDATE #2: Kevin Drum:
As John Schwenkler points out, a big part of the increase is accounted for by a large increases in the number of pets. We aren’t necessarily spending a lot more per pet, we just have more pets. In fact, he points to some market research that suggests cats have actually gotten cheaper over the years: we spent $85 per cat in 2001 but only $81 in 2007. (Dogs, conversely have gotten a little more expensive, but only by 11%, not the 30-40% the chart suggests.)
So which data is correct? Beats me. But considering the high-pressure sales job vets have adopted in recent years, I have a hard time believing that cat expenditures have gone down. After all, we didn’t use to get their teeth cleaned or spend a couple hundred bucks a year on fancy flea/heartworm/hookworm/etc. goop. Now we do. Caveat emptor.
UPDATE #3: Ezra Klein:
But whatever the graph’s problems, the sudden acceleration in medical spending on pets does offer insight into spending on people. If you took a limping Fido to the vet and were informed he had a malignant tumor in his foot and three months to live, you would cry, and feel terrible about it, but that was basically that. But what if you were told that there’s a $5,000 treatment that could potentially save your dog?
Suddenly, you have a choice. It’s not just how much your dog’s life is worth to you. It’s how much it’s worth to you to feel like you didn’t decide to let your dog die. A treatment that isn’t strictly “worth it” in economic terms — a treatment that may not even save your dog — may be worth it to you, because you want to feel like you did everything you could. You want your economic decisions to line up with your emotions.
The rise in health-care spending is not simply that we have trouble saying “no.” It’s that the march of health-care technology has forced us to make a lot more decisions. Conditions that would have simply, sadly, killed people 30 years ago have treatments — which may or may not be effective — today. And it’s hard to say “no” to those options. But the crucial point isn’t when we accept or reject the treatment. it’s when we’re faced with a treatment to accept or reject. It’s when death begins to look like a decision.
By my calcualtions, over this period aggregate spending on companion pet care (dogs, cats, birds and horses) has risen 23%. Aggregate medical expenditures rose more than 50% over the same period. So, first, if we use the AVMA actual tabulation, rather than asking people what they spent in a survey, a normal-English definition of vet spending rose at less than half the rate of medical spending.
Second, pet population grew a lot faster than human population over this period. There were about 16% more companion pets in 2007 than 2001, while there were only about 6% more people. The net result is that the growth in mean vet services per animal was only about 6% over this period (from about $120 to $127 per animal per year), while growth in medical spending per person over this period was well over 40% (from about $5,200 to $7,400 per person per year).
In some sense, of course, this is partially a product of rising income: people have more money to spend on pets, and this drags along some vet costs with it. But there is not a lot of evidence (at least from this chart) that disproves the idea that making people pay for healthcare out of their own pockets would lead to a ceteris paribus reduction in health care expenditures.
UPDATE #4: Conor Clarke brings a new chart:
I’m not sure why the growth of veterinary spending is a point in favor of conservative theories about the growth of health-care spending. Two of the most commonly cited conservative reasons for the rise in health-care spending are (1) The tax exclusion for employer-sponsored health insurance; and (2) malpractice liability, which is supposed to lead to defensive medicine and higher costs. But neither of those things happen in the veterinary market! If the original chart is correct, then are these things not really problems?
My overwhelming suspicion is that the chart does not tell us much that is useful about the market for medical care. I spoke with Andrew Biggs yesterday, and he very kindly shared his data from the expediture survey (which is not publicly available). He also cautioned against taking any of this too seriously. 700 words and two charts later, I agree.
Jonah Goldberg at The Corner:
Not only has pet ownership surged, but Americans’ attitudes towards their pets has been changing quite a bit as well. (My internet connection is slow and spotty, so forgive me for not linking to evidence backing this up as much as I’d like). If you read up on these trends, you’ll find that more and more people are treating cats and dogs like members of their families. Tens of millions of people now get their dogs and cats Christmas presents. And huge percentages of those people even wrap them! What this says about the culture or the specific pet owners is a discussion for another time. But it seems that if you have growth in the number of people holding such views, spending more on animal care would follow, particularly when there’s so much more vets can do to extend and improve the quality of life of their pets. Maybe Mark Steyn can make a point about childless couples transferring parental impulses to their dogs and cats.
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July 16, 2009 at 8:55 pm
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