Why are CAT Scans Cheaper for Cats than Humans?

A Lesson on How to Lower Healthcare Costs
October 29, 2018

Pictured above is my adorable three-legged cat Hopper.

In his short year and a half of life, he’s been through quite a few surgeries and even a CAT scan. When pets need medical attention, they often benefit from the same tools, machines, and expertise that humans use at the doctor’s office or hospital. The difference, though, is cost. While humans haven’t managed to bend the “cost curve” down in medicine, veterinary medicine becomes cheaper and cheaper with the passage of time. Humans and pets may use similar types of medical resources, but there’s one key difference in the care they receive: the source of payment. Regardless of country, human healthcare is almost always predominantly paid for by someone besides the patient or patient’s family. Yet in veterinary care, things could not be more different; comprehensive insurance and government subsidization are rare.

Check out the evidence for yourself. Even though pet insurance is carried by only 12 percent of owners, the insurance data that does exist can clue us in as to what is going on with prices. For the past several years, researchers at Purdue University have teamed up with Nationwide’s pet health insurance division to track expenses related to veterinary visits. Analyzing nearly 30 million pet health insurance claims, researchers found that the price of most-commonly used treatments actually decreased 6 percent from January 2009 to December 2017. The American Pet Products Association (APPA) surveys pet owners annually on a variety of subjects, including expenditures by category of pet care. This is broken down into average “surgical” prices and average “routine” veterinary expenses. The data clearly show that, over the 2007–2017 period, expenses have fallen when inflation is taken into account.

Human health spending is another matter altogether. America’s problem in this category is obvious—medical expenses almost always rise above the rate of inflation, ensuring that patients’ dollars will cover a decreasing share of medical bills over time. And this is not a US v. everyone else problem, as commonly alleged by advocates of state-run medicine. In fact, as Exhibit 2 shows, countries across the OECD increased their inflation-adjusted health care spending per person over the 2003–2013 period (most recent data for cross-national comparison). But why is healthcare cost growth ever present, whereas the price of other useful things (i.e. airfare, telecommunications technologies, household furnishings) has gone down over time.

One big reason for this may be that patients and their families usually aren’t paying (directly) for their healthcare services. In the US and virtually all countries across the developed world, most medical bills are paid for by a combination of health insurers and governments. This is not the case for all procedures; some surgeries and operations are not generally covered by insurers or governments. One famous example is laser eye surgery, an outpatient procedure meant to improve vision. In 2018 dollars, the cost went from around $2,400 per eye in 2000 to roughly $2200 per eye in 2018, a more than 8 percent decrease.

But only by looking at pet healthcare can we see what happens when the cost of routine surgeries, scans, and doctor’s visits are borne directly by families. In a sense, all spending on pets is “third-party”; Hopper has no savings account. But unlike human healthcare, the people agreeing to the procedures are the ones with skin in the game. Maybe the only reason we see a real decline in pet health costs is because humans too readily discard sick pets. There’s definitely some truth to this—many humans will not opt for expensive surgeries for their cats or dogs.

To put it another way, the healthcare demand curve is more elastic for pet services than for human services. But increasingly, humans are inclined to see their furry friends as family members and go the extra mile to ensure that they are healthy. More than 90 percent of pet-owning households consider their pets to be members of the family, a figure that has been steadily increasing over the past decade. Increased willingness to pay for high-end care means that veterinarians are rolling out ever-more advanced scanners and surgical tools. Even as pets become more humanized in the eyes of their owners, costs continue to dip when inflation is taken into account.

Is most of this due to the way services are paid for? It’s hard to say, but it is interesting that the same scans and surgeries for humans and pets have taken very different price paths. Perhaps empowering consumers to shop around for medical services, instead of leaving everything in the hands of insurers and governments, would lower costs more than existing law. Ending insurance coverage mandates and ending the tax preference for employer-provided care could go a long way to putting consumers in charge of the pricing process. CAT scans can be cheap for more than just cats!