Dentists and Skin in the Game

By Paul Krugman
The New York Times, July 30, 2015

Wonkblog (The Washington Post, 7/29) has a post inspired by the dentist who paid a lot of money to shoot Cecil the lion, asking why he — and dentists in general — make so much money. Interesting stuff; I’ve never really thought about the economics of dental care.

But once you do focus on that issue, it turns out to have an important implication — namely, that the ruling theory behind conservative notions of health reform is completely wrong.

For many years conservatives have insisted that the problem with health costs is that we don’t treat health care like an ordinary consumer good; people have insurance, which means that they don’t have “skin in the game” that gives them an incentive to watch costs. So what we need is “consumer-driven” health care, in which insurers no longer pay for routine expenses like visits to the doctor’s office, and in which everyone shops around for the best deals.

The usual response has been that this involves going where the money isn’t — that because health costs are dominated by big expenses that must be paid by insurers, there just isn’t much potential savings from increased deductibles, co-pays, etc..

But what if even the underlying premise, that individual choice will hold down costs, is all wrong?

As it turns out, many fewer people have dental insurance than have general medical insurance; even where there is insurance, it typically leaves a lot of skin in the game. But dental costs have risen just as fast as overall health spending, and it may be that the reduced role of insurers actually raises those costs. According to the post,

“In the rest of medicine, insurers have an important function in limiting costs and promoting quality. The market power of Medicare and major national insurance companies allows them to insist on better rates for their customers when they negotiate with doctors and hospitals.

“‘There’s been less presence from all kinds of insurance payers in the dental sector,’ explained Andy Snyder, who is in charge of oral health at the nonpartisan National Academy for State Health Policy. ‘Medicare does not cover routine dental services, and private dental coverage is far less common than private medical coverage. So, the dental industry has faced less of the cost containment and quality improvement pressures that the rest of the health care sector’s experienced over the last couple of decades.’”

So more skin in the game is not just useless but actually counterproductive.


Why dentists are so darn rich

By Max Ehrenfreund
The Washington Post, July 29, 2015

Dentists in some places are so well compensated that they earn more than the average doctor. According to a 2012 report in The Journal of the American Medical Association, the average hourly wage of a dentist in America is $69.60 vs. $67.30 for a physician. As recently as 1996, dentists were making less than doctors. Meanwhile, the average general dental practitioner took in $181,000 in 2013, according to the dental association, compared to $175,000 for a family doctor, according to WebMD Medscape’s annual compensation report.

(Also see excerpt in Paul Krugman’s article, above.)…

High deductibles and other cost sharing – “having more skin in the game” – make patients better health care shoppers the advocates of consumer-directed health plans tell us. Let’s see what insight comparing dentists to physicians can provide on this concept.

Free market advocates tell us that when patients are uninsured and spending their own money they will shop for lower priced care that is of higher quality. This supposedly also applies to patients with high-deductible health plans who are seeking care below the deductible limit.

Take the case of dentists. Patients are basically oblivious to the quality of the care so they are really interacting with the prices, but in what way? Patients have very little influence over the prices so their decision is whether to accept or reject the dentist’s recommendation for care. Unmet dental needs are ubiquitous in the United States. People are not getting the care that they need because they cannot afford it. Dental insurance has not begun to fill this need.

Revenues are dependent on price and quantity, and with the great unmet need, dentists are assured of an adequate quantity of patients without having to yield on their prices. Thus “skin in the game” for dental patients does not a bearing on more favorable prices but rather determines whether or not care will be received.

What about care from physicians that is expected to cost less than the deductible? There may be some price shopping at the periphery where the patient has options, such as diagnostic imaging, Lasik, or cosmetic surgery. But, by and large, patients are not negotiating prices in advance with their physicians, laboratories, emergency departments and other providers (though later on they may attempt to negotiate bills they can’t pay). Generally they are offered services at a given price and their decision is to either accept it or go without. Once again, “skin in the game” does not have much influence on prices but rather greatly influences whether or not the patient will forgo the recommended care.

Most of our nation’s health care spending is for patients with major problems who have exceeded their deductibles, thus “skin in the game” does not apply to them. So, as a policy to reduce total spending, high deductibles are quite feeble.

The incomes of dentists have improved such that they are now comparable to primary care physicians, with higher incomes for specialists in both fields. Empowering patients as shoppers certainly has not driven prices down. What it has done is to further entrench the suffering and injustices of grossly impaired oral health.

And in medicine, we are now expanding consumer-directed policies, especially high deductibles, that can only increase the scourge of unmet health needs – an especially tragic policy track since it will have little effect on prices but will reduce the quantity of beneficial health care services.

Paul Krugman quite appropriately labels this “skin in the game” approach to controlling spending as counterproductive.

In contrast, single payer is a much more powerful method of containing costs but does so in a system designed to get patients the care that they need. Shouldn’t that be our goal instead? Seriously.