All Commentary
Thursday, February 16, 2012

Pets, Vets, and Borders

A tale of two health care systems.

Libertarians frequently point out that, despite the claims of critics, the U.S. health care system is far from what a free-market health care system might look like. Aside from the obvious large role played by programs such as Medicare and Medicaid, which account for almost 50 percent of health care spending in the United States, various other government interventions have led, largely unintentionally, to the crazy, complex employment-related system we have.

One of the most problematic features of the system is the predominance of third-party payments in which negotiations over prices and services take place between provider and insurance company rather than between provider and patient. When most Americans go to the doctor or hospital, no one tells them how much things are going to cost. Those messy details are between the insurance company (or the government) and the provider. Patients are therefore unable to make informed decisions about whether certain procedures are worth it, nor are they able to shop around to find the necessary services at a better price. Since they pay only a small fraction of the bill, most people don’t much care. This third-party payment very much diminishes the competitiveness of the health care system, driving up costs and alienating patients.

Detailed Cost Estimates

By contrast, consider veterinary medicine. My dog required extensive vet care recently, and in several ways our experience is relevant to the debate over human health care. At both our local vet clinic and an animal hospital in a larger city, we were presented detailed estimates of the services to be provided, including low- and high-end estimates of the total cost. In both cases we were able to discuss what the providers would be doing and why, as well as the costs of other options. Had we been unhappy with what we heard, we could have very easily gone elsewhere. Not surprisingly, the quality of care at both facilities appears to have been excellent. That’s what competition does.

It’s also worth noting that on the supply side of the market, the vet industry is much less hampered by regulations and monopoly than is human medicine. The number of MDs is controlled by the American Medical Association, which keeps the supply low and ensures monopoly profits for doctors. Regulations on what nurses and others can do compared to doctors also prevent competition and keep prices higher than they would be otherwise. Veterinary medicine faces fewer regulations and barriers, which keeps the supply of vets larger and offers pet owners many more options at more competitive prices. In fact the final bill at the animal hospital came in around 10 percent lower than the low-end estimate. I’m not sure the final cost of a human hospital stay in the United States has ever come in below estimate!

Dogs without a Country

As it turns out, the story is even more interesting. The animal hospital in question is in Ottawa, Ontario. For all the contrasts between U.S. and Canadian human health care, vet care is pretty similar. If you’ve ever crossed the border into Canada for health care (the traffic usually runs south) or needed care when abroad, you know how complicated dealing with different government regulations can be. Not if you’re a dog. Our records were transferred by email. Despite the two countries’ different approaches to human health care, the less-regulated vet system works well enough for both to adopt it. (Vet fees are subject to some regulation in Ontario.)

All this goes to show that the artificial political boundaries human beings draw virtually disappear when it comes to nonhuman beings that are not subject to citizenship rules.

Finally, it’s worth noting that while my wife and I had to have our passports at the ready to show the border guards in both countries, all we needed for the dog was a certificate of up-to-date rabies shots. I can only wish that were our standard for human immigration: “You have all your vaccinations? Welcome to the U.S.”

My recent experience with veterinary medicine provides even more evidence that a truly free market in health care can work and work well. When people say the U.S. health care system is going to the dogs, my new response is: I wish.

  • Steven Horwitz was the Distinguished Professor of Free Enterprise in the Department of Economics at Ball State University, where he was also Director of the Institute for the Study of Political Economy. He is the author of Austrian Economics: An Introduction.