Saturday, July 25, 2009

US Pet Health Care

Andrew Biggs has a graph purporting to show that household veterinarian health care costs grew at the same rate as health care costs from 1984 to 2008: eyeballing it, it is a factor of 2.6-2.75.

This chart is making the rounds on the blogs, and is used to make various points about health care reform.

Let's look at health care cost per animal (or person).

Here are two pages with 2001 and 2007 stats on pet ownership from the American Veterinary Medical Association (AVMA):


Just taking dogs for example:

Veterinary expenditure per animal per year :
2007: $200
2001: $179

For comparison, the Consumer Price Index was 175.1 in January 2001 and 207.3 in December 2007 (202.4 in January 2007). (txt file). That is, veterinary care costs per dog grew at or slower than the Consumer Price Index.

Costs per animal rose by almost 12% during this period. If you eyeball Biggs' graph, overall veterinarian health costs rose from roughly $8 billion to $11 billion, which is nominally a growth of 37.5%. It can only make sense if the "veterinary expenditure" in the AVMA numbers is what the person paid the veterinarian, rather than all pet dog health care costs -- the rest would presumably be pharmaceuticals and medical tests. (But see ASPCA estimated costs of a pet at the link at the bottom of this post. It would indicate that veterinary expenditures are all pet health care expenditures.)

The problem with health care costs is that they were and are growing much faster than inflation. e.g., this from 2006, about health insurance increases:
Health-care costs are trending lower than in recent years but still well above the consumer price index. According to a Morgan Stanley Managed Care Survey, the average 2005 renewal increase was 14.8 percent.

This figure is down from 2004, which showed an average price increase of 15 percent and yet, still lower than 2003 when health-care inflation was at 20.4 percent.

While health inflation remains at these challenging levels, the consumer price index in 2003 was 2.3 percent, 2004 was 2.7 percent and 2005 was 3.4 percent.

The health insurance increases shown by Morgan Stanley's Managed Care survey suggest that health-insurance inflation ranges from 4.35 to 8.87 times the consumer price index for all urban consumers.

The health insurance cost is a good measure of cost/person per year, akin to the cost/dog per year.

Upshot: I don't believe Andrew Biggs' graph. Also see my comment on CIP's thread.

PS: ASPCA's 2008 pet care costs seems to be inline with the AVMA.

PPS: Note that Biggs' graph for vet care has a peak around 1995. Since the economy was growing at a healthy clip at that time, the reasons for the decline are precisely what?


CapitalistImperialistPig said...

From this government report:
"According to the American Pet Product Manufacturers
Association, total spending on pets in the United
States surged from $17 billion in 1994 to $38.4 billion in 2006. That's all pet care expenditures, but note that that's a bigger percentage growth factor than US health care for people.

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