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Questions which are rarely asked
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.
Posted by Tyler Cowen on July 13, 2009 at 04:12 PM in Medicine | Permalink
Comments
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.
Posted by: JackTrade at Jul 13, 2009 4:35:00 PM
But this doesn't seem to be all that complicated. Vetinary care is increasing because demand for it is increasing. I think there is also a attitude change when it comes to pet care. It used to be that you just let your animals go when they get sick, now pet owners will spend anything to keep their pets alive. People are seeing their pets as more than just a pet, but a family member. Honestly, hip replacements for dogs, who would have thought about doing that 20 years ago?
One of my dogs has a bump on his right front "shoulder" (for lack of a more knowledgeable term.) We have several options, 1) Just watch it and do nothing, 2) Have it removed and 3) According to my vet the "gold standard care" would be to have it removed and then tested for cancer. We have chosen number 1 and the bump on his shoulder has remained the same size. Maybe if I had a third party paying for it I would have hoped to go for the "gold standard" and not worried about the cost.
Just because vetinary care is for animals doesn't mean scarcity isn't an issue and that costs won't increase with increase quantity demanded.
Posted by: Matt C. at Jul 13, 2009 4:36:27 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.
Posted by: Andrew at Jul 13, 2009 4:42:38 PM
So what? Is anyone concerned with the rising costs of veterary care? Costs will rise until they don't.
Contrast that with human medical care, which WILL bankrupt our federal government very soon.
You could tell me that the amount spent on flatscreen TVs is rising at the same rate as medical care, and I'd have the same reaction. So what?
Posted by: Buzzcut at Jul 13, 2009 4:51:49 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?
Posted by: Jeff Yager at Jul 13, 2009 5:05:06 PM
Megan McArdle has really lost any credibility as an economist. Not quite as much as Krudman but she has missed on a lot of her analysis....IMO.
Posted by: WestWright at Jul 13, 2009 5:05:49 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.
Posted by: Floccina at Jul 13, 2009 5:12:57 PM
The graph is pretty, but misleading. It says much more about pet population growth than health case vs. vet care. Read the comments on the post for more info: pet population increased significantly more than human population during the time in question, making the actual results about a 12% increase in vet care expenditure *per-pet* vs. 38% increase in health care expenditure *per-person*.
Posted by: Aaron at Jul 13, 2009 5:14:36 PM
I want the Kevorkian of vets for my dogs.
Posted by: Floccina at Jul 13, 2009 5:16:47 PM
Remember that the animals get the same drugs and use the same technology that humans do, from the same manufacturers' R&D processes. If human demand raises price (because of moral hazard) it is not surprising that the price for vet care rises. The demand for vet care is pretty price-inelastic. I have three dogs and they are part of the family. One takes prozac (anxiety), has had ultrasounds and CT-Scans. This is what I would choose for myself and my (human) family.
Posted by: DJ at Jul 13, 2009 5:25:35 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.
Posted by: Leigh Caldwell at Jul 13, 2009 5:27:26 PM
Comparing aggregate spending over time on vet care can be misleading--there are similar drivers as with human care (technology, income effects), but also different ones (many more pets per capita, greater willingness to spend on pets). Also, there is no sense of the *difference* in per capita spending between pets or humans. It could be that the direction of costs is the same for both groups, but average costs is lower for pets.
It would be better to directly compare consumer-directed care with non-directed care. Some find that this does lower costs. Singapore is big on this model, and costs tend to be much lower there. Safeway has also managed to get this to work.
Another example might be non-insurance covered eye/dental surgery. LASIK, for instance, has dramatically decreased in cost and increased in quality.
Posted by: Thorfinn at Jul 13, 2009 5:31:30 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)....
Posted by: Patrick at Jul 13, 2009 5:33:45 PM
Jacktrade,
I think though that if you look at a distribution of human living spaces you'll find that there has been large relative growth in cities and suburbs and possibly commensurate access to medical care.
Posted by: Peter at Jul 13, 2009 5:38:08 PM
LOOK AT THE SCALE OF A GRAPH BEFORE YOU POST IT!
Posted by: Drew F at Jul 13, 2009 5:39:58 PM
"So why is vet spending rising along with human spending?"
Maybe the answer is that they are both a symptom of credit bubbles. I'm pretty sure animal care is anyway, and Megan sort of suggests that. I have a friend who is a vet in NYC, and she told me late in 2008 that visits had dropped off quite a bit, to the point that the animal hospital had to lay off employees, and even vets. I realize that's just anecdotal data point, but I think it suggests something about the elasticity of demand for animal care. Let's wait to see the data from 2008 and 2009 before we draw any final conclusions...
Posted by: Dave at Jul 13, 2009 5:43:18 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.
Posted by: Colin at Jul 13, 2009 5:44:45 PM
I don't get it. Vet care rises by $0.31 billion per year while health care rises by $56.8 billion per year. How are they comparable??
Posted by: Anna at Jul 13, 2009 5:45:28 PM
what dataset would let me compare gdp per dog in various countries and eras? thx.
Posted by: babar at Jul 13, 2009 6:13:09 PM
I note that luxury pet ownership is both increasing and intensifying, as people own more nonessential animals and increasingly view them as "members of the family." So I would argue that increased veterinary costs are due to increased demand, not misaligned incentives as is the case in human healthcare.
Posted by: athelas at Jul 13, 2009 6:15:17 PM
Hmm... The price of apples is rising in line with the price of oranges...
Posted by: deriuqer at Jul 13, 2009 6:21:35 PM
I'd suggest you scroll down to read: Ken Magalnik's comment about the metrics ... he links to some other stats that MIGHT be more meaningful. That being said, I think there are plenty of more meaningful stats out there on this topic.
Posted by: maco at Jul 13, 2009 6:51:35 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.
Posted by: Anon123 at Jul 13, 2009 7:32:59 PM
The scale is unnecessarily distorted. It plots total expenditures. Rather than per capita/per fuzzy friend. If we are looking at some idea of *costs* - though I really hate that word - then we should adjust for the number of pets. If we want to think about growing expenditures, then we need not. But if we only talk of total expenditures, then we can't slip back to talking about per cap outcomes. Still there is SOMETHING interesting in the comparison.
Posted by: Taggert J. Brooks at Jul 13, 2009 8:16:48 PM
Wasn't McArdle just cited as a new linertarian luminary? Neither, I think.
Posted by: Phil at Jul 13, 2009 8:21:33 PM
