Effects of occupational regulations on the cost of dental services: Evidence from #dental insurance claims #USA

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In the United States, occupational regulations influence the work tasks that may legally be performed by dentists and dental hygienists. Only a dentist may legally perform most dental procedures; however, a smaller list of basic procedures may be provided by either a dentist or a dental hygienist. Since dentists and hygienists possess different levels of training and skill and receive very different wages, it is plausible that these regulations could distort the optimal allocation of skills to work tasks. We present simple theoretical framework that shows different ways that such regulations might affect the way that dentists and dental hygienists are used in the production of dental services. We then use a large database of dental insurance claims to study the effects of the regulations on the prevailing prices of a set of basic dental services. Our empirical analysis exploits variation across states and over time in the list of services that may be provided by either type of worker. Our main results suggest that the task-specific occupational regulations increase prices by about 12%. We also examine the effects of related occupational regulations on the utilization of basic dental services. We find that allowing insurers to directly reimburse hygienists for their work increases one year utilization rates by 3–4 percentage points.

In the dental sector, state governments have expanded the legal scope of practice afforded to dental hygienists. It is still true in every state that dentists and hygienists are required to hold licenses, and that only a dentist may legally perform most dental procedures. But in recent years, licensed dental hygienists have gained the authority to perform a smaller list of basic procedures. The content of the list of services that may be provided by either a dentist or a hygienist varies across states and over time. In some cases, allowing hygienists to perform a service may open the possibility of hygienist-led firms. However, the regulations usually restrict what hygienists are allowed to do with and without the direct supervision of a dentist, which suggests that the overlapping regulatory framework is likely to matter most to firms that employ both dentists and hygienists.

Simple economic theory suggests that increasing the independent scope of practice of hygienists should put downward pressure on the prevailing price of dental services that can be produced using hygienist labour. The price effect is plausible whether the regulations are framed as a barrier to the entry of hygienist-led dental service firms, or as a restriction on the production function of firms that combine hygienist and dentist labour inputs to produce dental services. Although the end result is similar, the production function framework is more revealing about the ways that scope of practice regulations might affect market outcomes in the health sector. For instance, regulations might represent monitoring requirements that function as an implicit tax on the use of hygienists. Another possibility is that task limitations are a type of factor de-augmenting technology, which lowers the productivity of hygienists. More broadly, scope of practice regulations may alter the elasticity of substitution between hygienists and dentist in the production process. In each case, the regulations bind when at least some firms are forced to adopt a more dentist intensive production process then they would use in the absence of regulation. The upshot is that scope of practice restrictions – either entry barriers or production constraints – could lead to higher equilibrium prices relative to an unregulated or less regulated environment.

It have been studied the effects of a task based graded occupational licensing scheme that affects the way that dentists and dental hygienists are used to produce dental services. By presenting a simple theoretical model that helps explain some of the ways that such regulations might affect the dental service production function. A simple implication of the model is that the regulations lead to a more dentist intensive production process, which is likely to affect the equilibrium price of dental services. The use of a quasi-experimental approach to study the effects of the regulations on prevailing prices using data from dental insurance claims. The results showed that the price of basic dental services were about 12% higher when the service could only be provided by a dentist rather than by either a dentist or a dental hygienist. These results were quite robust to key assumptions related to spill over effects and statistical inference. In further analysis, the found that utilization of dental services is 3–4 percentage points higher when hygienists can be reimbursed directly for their services, which is an important gain given well-documented disparities in dental health and access to dental care. Overall, the results are consistent with the constrained production function model presented in the paper.

In most instances, the costs and benefits of licensing are difficult to empirically assess because licenses, almost by definition, make it difficult to construct reasonable comparison groups that can be used to estimate the levels of key health and economic outcomes under alternative policies. Cross-state comparisons are the most common way to proceed (Kleiner, 2000 and Kleiner, 2006), but these methods make it difficult to separate the effects of licensing changes from state-specific trends in the demand and supply for the affected services. In a broader sense, most of the licensing literature examines the effects of licensing on wages rather than on the prices that prevail in related product markets. By focusing on service-specific regulations, the ability to compare the effects of regulations within the same state by comparing prices in different product markets that should share similar underlying demand and supply conditions was enhanced. By studying prices rather than wages, the analysis gave a different perspective on the way that licensing restrictions affects consumers.

Another contribution comes from the analysis of graded licensing regulations. The bulk of the licensing literature frames policy discussions in terms of licensing, certification, and free entry options. This may be a natural statement of policy options, but there are very few examples of occupations that have been de-licensed in the United States (Kleiner, 2006). The graded licensing approach that was discussed in Arrow (1963) may offer an alternative approach that can reduce the economic disadvantages of licensing without overtly deregulating an incumbent occupational group.

The explicit link between job tasks and skill levels that is built into scope of practice regulations seems to fit well into the labour economics literature that is concerned with the factors shaping recent changes in the structure of wages (Acemoglu and Autor, 2011, Autor et al., 2003 and Goldin and Katz, 2008). Occupational regulations have not been examined much in that literature, which has instead focused mainly on the slowdown in the supply of skills, increases in demand for skill produced (perhaps) by skill biased technological change, changes in international trade that have led to the “off-shoring” of certain types of work, and changes in labor market institutional structures such as labor unions and minimum wage levels (Autor et al., 2008). One conceptual insight from the wage structure literature that may be particularly useful for research on occupational regulation is the idea of separating the concept of the skills possessed by different workers from the concept of the job tasks that workers perform in the economy (Acemoglu and Autor, 2011 and Autor et al., 2003). This perspective seems to apply very naturally to the notion of scope of practice regulations, although it does not appear to have been considered in this way in previous work.

Reference:

Wing C, Marier A. Effects of occupational regulations on the cost of dental services: Evidence from dental insurance claims. Journal Of Health Economics [serial online]. March 2014;34:131-143.

About the Author:

Dr.Hisham M Safadi (Hisham Safadi ) BDS & MSc Leadership and Management in Health Care Practice the University of Salford where his Master dissertation was in the effect of Emotional Intelligence on improving Dentistry care in Middle East. He was born and raised in the Emirates of Ras Al Khaimah, United Arab Emirates. Dr.Safadi had start his professional career as a dentist then turn to the field of managing medical facilities and investment management. His main interest is business start-up, leadership and mentoring. Currently he is leading several projects in Manchester that is related to enhance patient experience and improving leadership style through education.

Twitter: @hishamsafadi

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