On the right, the evil representative of the dental industry, seeking to maintain dentists' monopoly on the provision of all dental services. On the left, the noble entrepreneur, who only wishes to make the world a brighter place by providing safe, affordable teeth-whitening services.
This image is taken from a video created by the libertarian public interest law firm the Institute for Justice, which is backing a lawsuit challenging dental monopolies. As I put it in today's Economy Lab post:
The plaintiffs give the case a David and Goliath flavour: Lisa Martinez, former operator of a small teeth-whitening kiosk in Waterford Connecticut’s Crystal Mall, versus the Connecticut Dental Association. The lawsuit challenges the Dental Association’s right to prevent Lisa Martinez -- or anyone other than a qualified dentist -- from offering teeth-whitening services.
The Institute for Justice argues that, even though Ms. Martinez had no dental training whatsoever, her teeth-whitening business was using standard over-the-counter products. If these products are safe for an unskilled person to use at home, why shouldn’t they be safe for Ms. Martinez to apply in her little kiosk?
Now, as it happens, I don't have a huge amount of sympathy for either party involved in the case. Teeth-whitening products can cause serious harm if overused, so there is a case for making sure that people who are applying the products commercially have some training. On the other hand, there is no reason for giving dentists a monopoly on the provision of these services.
Canada has taken a different path. Here, unlike most of the US, dental hygienists can operate independently, offering services like scaling and teeth whitening outside of the confines of a dental office. Alberta was the first to free its hygienists in 2006, and other provinces rapidly followed suit, spurred by the federal Competition Bureau. The result has been an explosion in mobile dental services, servicing long term care and other residential facilities, and businesses with names like "Just Smiles," which offer lower cost cleaning and whitening services.
For an economist the interesting question is "How has increased competition affected prices?" This is how I reported the trends in Economy Lab:
Unfortunately it is hard to know whether more consumer choice has had a significant impact on overall trends in dental prices. Statistics Canada doesn’t have a price index for periodontal treatment like it does for fresh and frozen turkey. Yet a closer look at the provincial dental associations’ fee guidelines reveals something interesting. Prices for services provided by hygienists are increasing more slowly than prices for other dental services. In B.C., the price dentists charge for hygienists’ services rose by 1 per cent this year. The price of diagnostic services -- something only dentists can provide -- rose by 3.6 per cent. A similar pattern can be found in Ontario, where the fee for getting teeth cleaned in a dentist’s office rose by 0.9 per cent in 2011, while the suggested fee for oral surgery rose 6.1 per cent.
Could periodontal competition make root canals more expensive?
If a dental association has a monopoly on all dental services, it will price according to the inverse elasticity rule - the more sensitive consumers are to the price of dental services, the lower the price dentists can charge.
The existence of independent dental hygienists segments the market for dental services. The price charged by an independent hygienist is, in Ontario, about 10 percent less than the fee for identical work carried out in a dentist's office. Anyone who is really concerned about the cost of dental services - anyone who pays for their dental care out of their own pocket, for example - would be expected to visit a hygienist, rather than a dentist. Over time, dentists' clients would increasingly consist of two groups: those with dental insurance, and those in critical need of dental work - people with painful cavities, loose teeth, and so on.
With a mixed client base, a dentist might be tempted to keep the cost of a basic diagnostic check-up low, and try to persuade all clients to pay $28 for a three minute dental exam. With a client base consisting entirely of people with dental insurance, why not jack up the rates a little bit?
It's more complicated than this. Insurance companies and governments can exert pressure on provincial dental associations, and individual dentists can charge more or less than the fees suggested by the provincial fee guidelines. The Alberta Dental Association doesn't even publish fee guidelines (which is why Alberta has far and away the most expensive dental care in the country).
Since dental associations charge for their fee guides, I'm not going to be carrying out detailed research on the impact of competition on dental fees. Still, the idea that competition in one area could have perverse effects in another area is a fascinating one.
HT Matt Yglesias in Slate for the Lisa Martinez story.
Update: according to Coady Wing, a former student of mine who is working in this area, as of 2007 there were seven states -- California, Colorado, Montana, Nebraska, New Mexico, Oregon, and Washington -- that permited a hygienist to own an independent practice. For more details on the regulation of dental hygienists, see this paper by Morris Kleiner and Ken Park.