Thursday, August 06, 2015

A natural experiment between doctors and dentists

When most people think of health insurance, they automatically assume that dental care is excluded. In fact, most people don't really think of dental insurance much at all, at least until the next visit. Relative to health insurance, dental insurance has a tiny premium deducted from the paycheck of most people. But when people go to the dentist, though most routine procedures are covered, anything beyond that packs a wallop for the customer.

As Paul Krugman notes, this "skin in the game" should provide adequate cost containment for dentists, but that's not what is happening. In fact, dental care is one of the components of health care that has been rising much faster than inflation. I think a clear sign of this is what I see at my local dentists office.

My local dentist office is very nice, with all new construction, built to custom specification for this dental group. They just moved there a few months ago and the office is a jaw dropper. Big screen TVs are in every room. There is state of the art equipment and facilities. The reception area is beautiful with open ceilings, nice furniture and a nice view of the mountains to the west.

They are also running a contest, with a range of prizes including free dental care for life for one very lucky individual. Perhaps that prize is a tacit acknowledgement that dental care is a very high out of pocket expense. With all that is happening at my dentists office, the move, the new digs and all the new gadgets and technology, they must be rolling in the dough.

Research suggests that because of the lack of involvement by insurance companies and government insurance, dentists have the freedom to raise prices faster than inflation. For most of us, dental insurance covers just the basics and anything beyond that? We're lucky if we get half covered by the insurance we do have. It should be noted that Medicare doesn't cover dental costs, which more than a bit ironic since we tend to lose more teeth with age.

An article at the Huffington Post notes some very interesting, if a bit dated statistics on how much money dentists earn:
According to the American Dental Association, the average net income in 2009 for general dentists in private practice was $192,680. The average for specialists, including orthodontists and dental surgeons, was $305,820. By comparison, the average income for pediatricians and family practice physicians in 2012, according to WebMD's Medscape, which tracks physician compensation, was $173,000 and $175,000, respectively. To be sure, many dentists make significantly less than the average, and their prices reflect that. And dentists who don't own their own practices or who work in public health settings typically make less than general dentists in private practice, and considerably less than specialists.
$300k for a dental specialist? That's close to what a heart transplant specialist makes. According to Medscape, in 2014, cardiologists earned an average income of $351,000, slightly down from the previous year. Cardiologists have seen their income decline slightly between 2013 and 2014. Judging by my local dentist's office, that's the opposite of what has been happening for his profession.

BenefitsPro, a website dedicated to tracking employee benefits has noted that dentists are working hard to stay out of public health care to ensure they can charge "market prices" for their services. Dentists have also largely escaped the new regulations under Obamacare. What really makes this interesting is that economists and the Congressional Budget Office have noticed a major slowdown of health care spending as a result of Obamacare. Not so much with dental care.

So the conservatives have got it wrong. When people have more skin in the game, the dentists have shown us that costs rise because there is less insurance or government oversight to contain costs. Expert knowledge of an industry is what is required to contain costs. Fortunately for dentists, most people are not experts on dental care costs.

Perhaps it's time for an Obamacare just for dental care.
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