Between 1996 and 2012, spending on health services for people grew 50%, but the amount of money we spent keeping our pets healthy actually rose at a faster rate--60% to be exact. During that same period, jobs for physicians jumped 40%, while veterinary employment doubled.
Figures such as those, based on data from the Consumer Expenditure Survey, prompted economists from Stanford University and the Massachusetts Institute of Technology to conclude in a new paper that animal health is just as inefficient as human health. Their study was published recently by the National Bureau of Economic Research (NBER).
In addition to rapid spending as a share of GDP and employment growth for health providers, there are two other factors that the human and pet worlds share, the authors contend. One is a strong “income-spending gradient,” meaning higher incomes are associated with better healthcare in both people and pets. The other is a propensity towards shelling out more dollars toward the end of life.
To examine end-of-life spending, the authors collected records from one California veterinary clinic and found that the owners of 44 dogs who suffered from lymphoma spent much more in the final months of life than they had prior to the diagnosis. Medicare data shows similar trends in human medicine, they say.
Of course, there are some key differences between human and pet health, not the least of which is insurance coverage. Although several new pet insurers have popped up in recent years, only about 1% of dog and cat owners opt to carry coverage, according to several estimates.
Several companies have latched onto the insurance gap between human and pet as a business opportunity. In 2015, Chicago-based Figo raised $3.9 million to launch its pet insurance product amid a crowded field of rivals that includes Trupanion ($TRUP) and Nationwide. Figo aims to set itself apart by charging annual deductibles rather than per-condition deductibles as other companies do, and by making it easier for customers to file claims via their smartphones.
Trupanion has been spending heavily on marketing its service, which mirrors human health insurance in that it allows veterinarians to file for payment at the point of service, so pet owners don’t have to pay out of pocket and then wait for reimbursement. The company has made some progress: In the second quarter of this year, it turned cash-flow positive for the first time.
Nevertheless, the entire pet insurance market is worth only about $720 million a year, market researcher IBISWorld estimates. That’s a sure sign that the majority of pet owners are still opting to carry most of the financial burden for an inefficient health system on their shoulders.
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