At the vet for her annual check-up, our cat Scarlet got a clean bill of health except for her teeth. She needed a cleaning and several extractions–dental work that required anesthesia and perhaps an overnight stay. Many hundreds of dollars later, she came home and now is purring as I type.
Where are we going? To pet and human healthcare spending.
What Pet Health Care Spending Says About Humans
Scholars who try to explain why we spend so much on healthcare in the U.S. usually cite insurance and regulatory constraints. Unaware of cost, consumers have little reason to conserve. Further contributing to the problem, regulation and payment systems create inefficiency.
But then, researchers from Stanford and MIT pointed out that while there is little use of insurance for pet healthcare, still consumers do not conserve. Different also, on the supply side there is minimal regulation. They ask why we have similar spending and end of life results for pet and human healthcare when the demand and supply side incentives differ.
Pet spending is soaring. A growing proportion of GDP during the past 20 years, pet spending on vets, supplies and meds almost parallels the rise in human healthcare spending.
Pet care spending is up:
Within Pet Spending we have soaring spending on veterinarians among higher income households:
The similarities even continue with end of life care. The spending for 44 dogs with lymphoma spiked during the month that they died. For people, the increase begins three to four months before death.
Our Bottom Line: Behavioral Economics
The psychologist who won the Noble Memorial Prize in Economics, Daniel Kahneman explained that human behavior was not entirely rational. Contrary to the intractable textbook logic of demand and supply, life is different.