I have a public confession to make: I’m having an extramarital affair with the database of the Federal Reserve Bank of St. Louis, or FRED. There, I said it. I feel better.
FRED and I spend many happy hours together trying to figure out what’s going on in the world. Recently FRED and I went looking for the harmonized index of price changes by sector in Ireland.
I found the sub-index for the price of dental services in Ireland, and my teeth started chattering. The chart below shows three series from 2000 to 2012, each made comparable to one another using an index where 2005 is the base year. Indexing allows us to compare changes directly. So if the value for dental prices in 2007 is 113, you know that there has been a 13% increase from 2005 to 2007. Set your eyes to stun, everyone.
What does the chart show? Well, it should surprise exactly no one that medical services are getting more expensive faster than the general increase in prices for things like tea and coffee. It should surprise you that the price of dental services—extractions, dentures, that sort of thing—is more than 20% above the general price level at the last measurement, and more than 7% above the price level for medical services.
Since 2007, the price of dental services has always been above the general price level, and always above the price of all medical services.
The sharp increase in dental prices in 2010 happened because the government reduced benefits associated with medical cards and stopped offering free dental services under a PRSI scheme, so dentists had to pass the costs on to consumers. Since 2010 there has been little or no price change, with prices even falling by about 2%.
In all fairness to the dentists, who are reporting drops in demand for their services, like every other profession during these tough times, experiencing such price stagnation has to be quite difficult to run a business. The general price level during that time actually fell, making the difference between all prices and dental prices even more obvious.
The Competition Authority examined the dental services profession and in 2007 issued a report that criticised the profession sharply.
The report opened as follows: “Competition in dental services is restricted and discouraged by an outdated system of regulation for dentists and related professions. The number of dentists and orthodontists being trained in Ireland has not kept pace with the growing demand for dental services. Consumers in Ireland do not have the benefits of the competition between dentists and a range of other qualified oral health professions that exists in other countries. As a result, the prices consumers pay for dental services are not as competitive as they could be and consumers do not have the full range of information and options available to them to purchase appropriate dental services for their needs.”
The report contained a number of simple fixes, like letting dentists advertise, issue discounts, create new categories of dental professional, and corporatize to make dental practices more competitive, and cheaper.
In a 2011 update, the Competition Authority noted a number of changes had been made, like allowing advertising, but not discounting or, crucially, reviewing the number of training places to increase the number of dentists over time.
The dental services price increase comes straight from textbook economics: we have a profession that, in the interest of service quality, restricts the supply of available qualified people, causing increases in prices the consumer must pay for. The problem is that process went too far. The sector is too regulated, under supplied with qualified people, and relatively uncompetitive. So prices remain high. Prices can stay high because dental services are not like buying red pencils or blue pencils in a stationary shop: when you need a dentist, you really need one. If the price of the blue pencil is higher than the red one, you just pick the red one. No problem. There is much less transparency between dentists, though this is changing with new mandatory price displays.
When it comes to dental care, the only other option is a trip to Northern Ireland or another country, which carries its own risks, as the Dental Council is at pains (no pun intended) to point out in a less than helpful pamphlet.
Not seeing a dental hygienist and a dentist regularly contributes to long term damage of your teeth and gums. The price of dental services, especially without a government subsidy, will impact on the overall, long term, dental health of the nation. This is an important issue.
On a positive note, there is helpful evidence from the OECD of how unmet needs for dental examinations differ across member states. Ireland does not fare badly at all: the poorest and the richest have their dental needs seen to. The richest fifth of the population only had their needs unmet 2.6% of the time, while the poorest fifth had their needs unmet 3.9% of the time. In Germany the richest fifth of the population only had their needs unmet 1.7% of the time, while the poorest fifth had their needs unmet 9.7% of the time. Ireland is doing quite well.
The Ireland of 2009, that is.
This snapshot of dental inequality was taken before the reduction in government support for the dental programmes, so the updated data may show how damaging to the poorest this reduction has or has not been. Ireland is an unequal place, and access to dental services may be curtailed by household budgets and by waiting lists for patients with medical cards. Only time will tell.
The Dental Council and the Department of Health have not met the most important recommendations of the Competition Authority, despite the extreme price differences between dental and other medical services, and long term the public may suffer as a result.
Published in the Independent.