Once a year, I bring my ill-tempered three-legged tabby cat (named Hopper) to the veterinarian. No one ever has a good time or particularly enjoys the cacophony of hisses, growls, and whiny meows. All the same, I can’t help but feel an “Alice in Wonderland” sort of feeling while talking to my feline’s healthcare providers. Most procedures and medical tests for our furry friends are the same as ours. But unlike the human healthcare system, prices are transparent and upfront in pet care. While no one likes hearing that Fifi’s surgery will cost $600, having costs out in the open keeps prices tethered to reality and under control. Lawmakers can throw patients everywhere a (figurative) bone by opening healthcare markets to competition and encouraging price transparency.
When most owners bring their furry nincompoops to the veterinarian, insurance simply isn’t a part of the conversation because nearly 2 million cats and dogs are covered by insurance policies in the U.S., compared to more than 180 million cats and dogs owned in total.
Compare this less-than-2 percent coverage rate for our pets to the predominance of human health insurance. Around 90 percent of Americans have health insurance, with most plans covering at least some routine doctors’ visits and predictable expenses such as medications. Americans pay even less money out-of-pocket for medical care (as a percentage of expenditures) than most of their Canadian and European (i.e. Germany, United Kingdom, Sweden) counterparts.
When the government and/or insurers are footing the bill, providers have little reason to disclose prices. Patients asking a doctor’s office or hospital for the price of, say, a CAT scan or an appendectomy will probably be stonewalled. With no price transparency and other people paying the bills, costs skyrocket out of control and healthcare expenditures climb far in excess of the rate of inflation. From 2008 to 2018, healthcare prices in the U.S. climbed 21.6 percent while prices for goods and services overall grew by 17.3 percent (measured by GDP deflator).
But not so in the pet healthcare sector, where consumers are exposed to price and veterinarians have a real incentive to keep costs low. Because pet insurance accounts for such a tiny sliver of the veterinary healthcare market, the prices that they pay for claims reflects prices that consumers are willing to pay rather than the third-party driven “prices” of the human healthcare market. For the past several years, Nationwide’s pet health insurance division has partnered with Purdue University researchers to track trends in pet insurance payouts. The researchers track a “basket” of the most commonly-utilized procedures to see how the typical veterinary visit has changed in price over time. According to their research, these ordinary expenses declined by 6 percent from January 2009 to December 2017 after adjusting for inflation.
This decrease is corroborated by less reliable sources, such as the American Pet Products Association (APPA) annual consumer spending surveys. For virtually every year tracked (accessible via web archive), cat and dog owners reported spending less money on average routine and surgical visits. The data is jumpier than the Nationwide and Purdue rigorous analysis of 30 million insurance claims but confirms an interesting – and counterintuitive – trend. In a system where consumers and patients’ “representatives” have enough skin in the game, healthcare prices behave like they would in most other markets.
There are, of course, differences between pet and human healthcare. Owners are far less likely to spend money treating Fluffy for cancer than they would for their own chemotherapy treatments. All the same, prices continue to decline in real terms as a rapidly growing percentage of pet owners regard their companions as members of the family and worthy of medical care. As these numbers increase further, policymakers should take notice and keep tabs on price trends. Perhaps increasing consumer exposure to prices and empowering them to pay medical expenses directly via Health Savings Accounts would lead to the same declining prices seen in the veterinary world.
I’m not sure what medical surprises await Hopper in the next few years, but prices are all but guaranteed to come up for discussion in future vet visits. This norm may be unpleasant, but it sure seems to keep costs under control. Humans and their pets can benefit from a price structure that encourages competition and cost control.