Much of the national dialogue about health care costs focuses on payment reform and the power of market forces. Researchers compared the price-sensitivity of decisions between health care and pet care. The big idea—don’t lose sight of emotions when tackling the problem of health care costs.
Health care has been coined “uniquely inefficient” when compared to other industries, with the blame largely placed on the prevalence of insurance and government regulation. You often hear, ‘if people just knew the price, then health care costs would go down.’ In their January 10, 2017 HBR article, “What the Cost of a Trip to the Vet Tells Us About Why Human Health Care Is So Expensive,” professors of economics Amy Finkelstein and Liran Einav compare the similarities of two industries where decision-making is often emotionally and financially charged. Their findings run counter to price transparency. Finkelstein and Einav found that even when pet owners know the price, they still favor increased spending.
Health Care vs. Pet Care
The authors unpack an impressive amout of data to support their assertions in their NBER working paper, “Is American Pet Health Care (Also) Uniquiely Innefficient?” Marcie Hopkins, patient experience project manager (and graphic design phenom for Accelerate), highlighted four key findings in the following visuals.
Figure 1. Pet care spending increased more than health care spending 1996-2012
Source: Adapted from Figure 1, p. 5. Einav L, Finkelstein A, Gupta A. Is American pet health care (also) uniquely inefficient? NBER 2016. Working Paper 22669. Accessed online 17 Feb 2017: http://www.nber.org/papers/w22669.pdf
This visualization reflects annual out-of-pocket spending per household in four spending categories using Consumer Expenditure Survey (CEX) data between 1996-2012. Growth in spending on pets surpassed spending in other industries.
Figure 2. Veterinarian and related services grew faster than physician and physician-related services
Source: Adapted from Figure 3, p. 7. Einav L, Finkelstein A, Gupta A. Is American pet health care (also) uniquely inefficient? NBER 2016. Working Paper 22669. Accessed online 17 Feb 2017: http://www.nber.org/papers/w22669.pdf
Comparison of veterinarian and veterinarian-related services and physician and physician-related services reflects remarkable growth in employment and establishment of businesses compared to other industries. Country Business Patterns (CBP) data between 1996-2013 show that employment and establishment growth were similar among human and pet care, with physicians growing 40% and vets nearly doubling over the same period, with the other two industries once again remaining flat.
Figure 3. People spend lots of money for loved ones at the end of life
Source: Adapted from Figure 4, p. 8. Einav L, Finkelstein A, Gupta A. Is American pet health care (also) uniquely inefficient? NBER 2016. Working Paper 22669. Accessed online 17 Feb 2017: http://www.nber.org/papers/w22669.pdf
The above figure differentiates the emotionally charged decisions of both pet and human health care consumers, by highlighting the spike in spending for end-of-life care among lymphoma-diagnosed dogs and lymphoma diagnosed Medicare beneficiaries. The authors muse that the heart of complexity is in the nature of health care decisions: “Trading off potential health improvements against money—may make coldly rational cost-benefit decisions unlikely.”
Contributors: Accelerate team - Marcie Hopkins, Kim Mahoney, Mari Ransco and Chrissy Daniels.