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A Lion, a Dentist and the Rising Cost of Care

The problem with health costs is the fact that we don’t treat health care like an ordinary consumer good.

(Photo: Gable; Canada/CartoonArts International/The New York Times Syndicate)

The Washington Post’s Wonkblog recently published a piece inspired by the American dentist who paid a lot of money to shoot Cecil the lion in Zimbabwe, asking why he – and dentists in general – make so much. Which was all pretty interesting to me, since I’ve never really thought about the economics of dental care.

But once you do focus on the 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 in the United States have insisted that the problem with health costs is the fact that we don’t treat health care like an ordinary consumer good. People have insurance, which means that they don’t have the “skin in the game” necessary to incentivize them to watch costs. So what we need, the thinking goes, 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 savings to be had from increasing deductibles and co-payments, for instance.

But what if even the underlying premise – that individual choice holds down costs – is all wrong?

As it turns out, substantially fewer people have dental insurance than have general medical insurance. And even when dental insurance is available, it typically leaves patients with 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 has actually raised those costs.

According to Wonkblog: “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.