Labor proposes giving free dental care to those earning less than average earnings ($55,000) to reduce the 650,000 waiting list for public dental care. I wonder how this will work. The price of dental services is not determined by government – it is market-driven. Given that it takes time to train new dentists and that there is currently an excess demand for State Government-provided public services I assume that the extra servicing would be achieved by offering the additional work to those dentists who currently serve private patients.
This would mean an increase in the demand for the services of such dentists which would raise their supply price. The hourly cost of a dentist is around $295 and it is claimed 20% of patients are not currently seeing such dentists because of the cost of services.
I don’t have data so let me make some guesses of the impact here.
The induced rise in dental costs might be more than proportional to the extra demand so the cost per hour of dental services might rise quite a bit – say by 30% to nearly $400. If each of those on waiting lists has say 4 hours of dental services required the cost of this plan would be, ignoring administrative and other costs, around $1.04 billion.
These other costs should include the lost consumer surplus from those who currently pay for their own privately-provided services but who will now face higher prices. Also many of those who currently pay for their own services but earn less than average annual incomes will now opt to augment the temporarily-shortened public queues. These factors add to costs significantly. In addition these proposals provide no incentives for people to take better care of their teeth.
The cost figure here is a rough back-of–the-envelope calculation but its outcome does accord with press estimates of the cost which come to around $1 billion. Almost predictably the Labor Party provides no estimate of these costs (new Shadow Health Minister says all will be made clear closer to the election) and, as usual, hopes the public will treat the reform as a costless social welfare measure. The Age predictably describes the dental reform as ‘well-targeted’ though it acknowledges no costings have been provided.
This seems to me a poorly-thought-through policy option. Options which increase the supply of dentists by reducing university admission scores and which improve dental health through education would have had the respective effects of increasing dental supplies and reducing the demand for such services. These measures would have improved access to cheaper dental services.
A major beneficiary of this plan are the dentists who predictably support it - they will earn higher incomes funded by the tax-payer and subject to no government control. Income will be distributed from those who pay for their services to those who currently don't and those earning less than average income who will defect to the public scheme as public waiting lists fall.
Overall the supply of dental services to the community will not increase since this measure addreeses demand and not supply. There will be no more services net - its just that some who now pay will opt out of treatment or settle for lower standards of treatment to give way to those on the public list.
Finally, one has to ask why the State Governments who are responsible for public health care will suddenly now perform better.