THE RISING COST OF ORAL HEALTH CARE: ANALYSIS OF

DENTAL MARKET Author: Dr. Shoeb Ahmed Ilyas BDS, MPH, EMSRHS, M.Phil (HHSM), MHRM, MS (PSY), MS

(BIOTECH), PGDMLE, F.H.T.A.

Health Care Quality Management Consultant

Ruby Med Plus, Telangana State, India.

E-mail: support@rubymedplus.com / shoebilyas@gmail.com

“No one can distribute Gucci loafers better than the market, but a pure market

cannot distribute health care”

- Uwe Reinhardt

Introduction

In India for the last 25 years, increased oral health care expenditure has emerged as most

important concern raising questions on the optimal level of expenditure devoted to oral

health care irrespective of age, income, region, caste, culture and so on. Oral health care

expenditure is at much higher level know than it was in the past because of rise in

tendency to use oral heath care resources as income of individuals rise, newer technology

expands the treatment possibilities available to the population, keeps oral health care

output rising, partly by aging population and reimbursement facilities available to the

public by government, public and private sector undertakings.

Oral health care industry structure drives competition and profitability and it is not based

on fact whether this sector is emerging or maturing, high tech or low tech, regulated or

unregulated. The relationship between expenditure and benefit across most dental

interventions is not clearly known and in many cases we do not know whether further

expenditure represents good value to the money. Expenditure is simply price time’s

quantity or volume of consumption. Most of the growth in oral health care expenditure is

related to the large volume of health care delivery rather than price increase in dental

materials. The growth is in the identification of the cost-effectiveness of oral heath care

interventions, which relies on defining the benefits from individual dental treatments.

Defining benefits, despite all the optimism generated by such outcome measures as

quality adjusted life years (QALYs) remain in early stages of development. QALY is also

a measure of oral health status, combined with quality of life and survival duration into

an index that is frequently used to evaluate and analyze clinical decisions and provide a

common unit of measurement that allows valid comparisons across alternative oral health

care programs designed on fixed budgets.

There is steady increase in the share of national resources devoted to oral health care,

which indicates that income elasticity of oral health care expenditures is defined as the

proportionate change in expenditure given a proportionate change in national income, is

greater than one. A one percent increase in gross domestic product (GDP) is associated

with a greater than one percent increase in oral heath care spending. At current levels of

spending, additional resources devoted to dental care may not improve the health status

of the population significantly.

In terms of economics, the demand for dental care is more prices elastic. Elasticity

estimates vary base on person’s needs and type of dental service needed. As the prices of

a dental product or procedure continue to climb, purchasers demand lower cost

alternatives. Technological change in oral health care delivery tends to increase cost of

treatment. The demand for dental care is associated with variables like price, income,

tastes, preferences and oral health status.

Most dental services are preventative and some are elective. Usually the normal demand

for oral health care is based on maintenance. On an average 75 percent of oral health

services performed comprise of extractions, scaling and prophylaxis, restorations, oral

examinations and the rest is performed for cosmetic, traumatic, conservative and teeth

replacement reasons. Health Insurance is slowly growing in the Indian dental market.

Health Insurance coverage reduces the net out-of-pocket price of dental services and thus

increases the quantity of oral health service demand. Proponents of market approach

visualize dental insurance reform in India as an essential element in improving access to

the dental care system.

Dental patients often have little knowledge about the price and quality difference among

oral health service providers. In Indian dental market, dentist with market power not only

good price takers for their services but also they vary the prices they charge and patients

respond to those price variations. In case more dental service providers are clustered in a

given location induces more competition and drives down the average cost of providing

the dental services and patients get advantage of bargaining. In these types of perfect

markets, dentists serving more patients, get advantage of economies of scale that help

them to serve at average cost.

In many locations dentists strive to differentiate their prices by adopting various options

like easy location of their practice, technology used for patient care and quality of care

provided. At the same time dental patients have little information to judge dentists and

they rely on recommendation of friends and family members. Hence dentists are

imperfect substitutes for one or the other reasons in Indian dental market. A lack of clear

and readily available information on the availability, quality and price has been identified

as a primary contributor to market failure in dental market, which makes it difficult for

patients to make informed choices and differentiate oral health service providers.

Due to asymmetric information, the dentists are in a position to induce the patients to

purchase more dental treatment. The dual role-played by dentist as adviser to the patient

and also provider of recommended dental treatment creates a potential internal conflict in

the mind of dentist. What is best for the patient in terms of clinical efficacy and prognosis

and what is best for the dentist in terms of financial reward and hence dentists are faced

with trade-off in conscience, income and leisure time. Clinical decisions involve cost as

well benefit, hence dentist allowing cost consideration into treatment decisions is morally

repugnant as most dentists are not trained in cost-benefit analysis and other economic

principles which can help their patients to guide better for their oral health needs.

Advertising provide dental consumers with information on alternative sources of dental

service supply, which will result in lower prices because consumer demand for

individual dental service provider becomes more elastic. The important goal of

advertising is to change consumer perception of the dental services and increase

consumer demand. In theory, high quality dental service providers can gain more by

advertising through repeat purchasers of dental services. In practice low-quality

providers advertise more. The effect of advertising on quality is determined by

consumer demand for quality and dentist determination to produce quality, which is

governed by ethical standards of dental profession. Professional code of conduct

discourages direct-to-consumer advertising, which makes new entrants difficult to

achieve break-even in their dental practice.

The time spent by young dentist in pursuing postgraduate is valued by the opportunity

cost of the income forgone, which is called Human Capital Investment (HCI). As it is

realized that cost are borne early in person’s life and returns are realized later on hence

return on investment (ROI) is more for postgraduates than graduates in dental market.

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