Tuesday, January 17, 2017

Can pet economics tell us something about human health economics?

A recent HBR piece by Liran Einav of Stanford and Amy Finkelstein of MIT compares recent trends. for spending on veterinary care to spending on health care for humans.  They find that total spending on both items has risen more than spending overall, meaning more and more of our budgets are going to veterinary services as well as health care for people.  Spending by income brackets shows the same pattern, with much larger spends for high income than low income households.  Also spending for veterinary care tends to be concentrated in the last months of life, just like human health care.

These similarities are striking in some way because there is no employer-provided veterinary care insurance and there is no Medicare- or Medicaid-like program for pets.  So the trends for pet health spending closely mirror those for human health spending even though the role of government and insurance is quite different in the two markets.

The careful reader will note that Einav and Finkelstein do not address the question of price inflation for veterinary and human health care.  We all know that human health care inflation is much higher than overall inflation.  The picture for veterinary inflation is more mixed.  A research team from Purdue looked at the inflation measure published by the Bureau of Labor Statistics and then developed their own price index based on pet insurance claims submitted to Nationwide.  The BLS veterinary care price index increased by 25%, well above the 12% inflation rare for 2009-2015.  The price index based on the Nationwide index showed no veterinary inflation over this period.  

One last question: if we are spending more and more on our pets' health, are they getting healthier?  Are they living longer?  Are they leading more active lives?  Are they getting more tummy rubs?  Clearly this calls for more research.

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