dental practice July 2009
www.dental-practice.org
Economic outlook for high street
dentistry: part 2 – the microeconomics
Concluding the series, Stephen Tidman looks at what is happening within the dental market
L
AST month we saw how The lack of a fluoridated water contract. It was a fairly modest change expenditure back on track but,
disequilibrium in the wider supply despite the enormous oral compared to recent times, reducing the unfortunately, they returned to the
economy, caused by the health gains, particular in those in amount of a GDP’s NHS turnover DRSG and a seven per cent fee cut
collapse of largely deregulated financial greatest “need” but who, again, do not paid by fees for treatment from almost followed, with prior approval being
markets, might impact on the dental translate this into demand, is another 100 per cent to 80 per cent, with the lowered from £00 to £200.
market through reductions in example of market failure. remainder coming from non-work- So what would have happened if the
consumer demand and the threat to There is no doubt that the irrational sensitive adult continuing care Government had not intervened by
record levels of government funding fears of some consumers have been payments and child capitation reducing fees? Dentists had
earmarked for NHS dentistry over the major factors in preventing its payments (18 per cent) and direct experienced the new contract and felt
next few years. widespread adoption – again a public payments like the reimbursement of less uncertain about its effects.
Also, we looked at how measures to dental health issue. However, even in business rates (two per cent). If the market was left to adjust and
restore the economy to full the absence of this resistance, Under the Dental Rates Study Group find its own equilibrium, GDPs would
employment were not new. Equally, I privatised water companies would be (DRSG) system in operation at the have done less work as they felt more
hope to illustrate in this article that reluctant to undertake this measure of time, once the “pool” was determined secure – dentists are no different to
while the scale of the disequilibrium in their own volition because of the cost – target average net income plus anybody else in that their working
the dental market caused by the most implications. average forecasted expenses (target week has been steadily reducing.
radical change to NHS dentistry in But what is the rationalisation for average gross income) multiplied by They would cease to actively recruit
England and Wales since its inception governments of today getting directly the number of dentists – any patients and let their continuing care/
is unprecedented, we have certainly involved in the indiscriminate anticipated increase in output would capitation lists settle down to more
been here before. provision of general dental services lead to a cut in fees and the converse manageable levels.
(GDS) for all, irrespective of ability to for a fall in output. Crucially, a fall in Essentially, the system would have
Background pay for private care? Ironically, it is output had to be assumed, otherwise stabilised once again at lower, if not
Why, might you ask, are we focusing governments in doing this which create the new contract would have been original, levels of output (and therefore
on NHS dentistry as being the cause of the market failure in dentistry. heralded by a drop in fees, exacerbated GDS expenditure) as it returned to
disequilibrium in the dental market, The consequence of setting price by the need to fund the new capitation equilibrium. The effect of a fee cut and
given the continual decline in its below market equilibrium is to lead to payments, and would have been dead the lowering of the prior approval limit
market share? excess demand (where demand exceeds in the water. was to re-introduce uncertainty and
Well, as reported last month, in supply), making it difficult for the Despite the opposition of the therefore instability into the system,
200/07 the UK spend on NHS high public to find an NHS dentists or profession, the contract was introduced with the perverse effect, from the
street dentistry was still approaching forcing them to obtain treatment in October 1990 – six months earlier Government’s point of view, of
£2.7 billion out of an estimated total privately, at a price greater than the than intended. increasing expenditure as GDPs
spend of some £5.7 billion and in equilibrium price in the absence of GDPs were faced with uncertainty, continued to up their workload as they
terms of dentistry delivered to patients, government intervention. both about how the new system would tried to protect their income.
its significance is even greater, Difficulty in obtaining NHS work and the effect on their income. Indeed, it took a number of years
representing some 70 per cent of the dentistry, with the option to go private, Added to this, there was a perception before expenditure was under
market. But what purpose is served by will always be present where that the contract was under-funded. “control”. Also, GDPs began their
governments getting involved in governments set NHS prices below the GDPs’ rational response to this was slow but systematic move into the
providing dental care? The provision market equilibrium, just as waiting lists to actively recruit patients onto their private sector, free of the vagaries of
of “public goods” and regulation of are a feature of NHS healthcare where lists, particularly those who had government interference.
markets is rationalised by the concept prices do not ration the availability of attended the practice in recent years,
of market failure. treatment. generally irregular attendees, who Here we go again
Examples of public goods include Again, it is perhaps not without needed treatment. This, coupled with Fast-forward to April 200 and we
externalities, where behaviour impinges some irony that demand for dental care publicity encouraging patients to have changes to the NHS dental
on others because property rights are ill is not from those with the greatest register, led to the expected level of contract in England and Wales that
defined, as in the case of pollution, or “need”, the lower socio-economic 17.7 million adult registrations being make the changes and subsequent
the spread of contagious diseases, like groups, but from the better off who exceeded by over 22 per cent and disequilibrium of the early 1990s pale
the recent outbreak of swine flu, where benefit from the blanket approach of expenditure way over allocation. into insignificance.
there is a central public health role price controls and subsidies. Initially, two “solutions” were The adult fee scale of over 400 items
requiring education, planning, and the Indeed, NHS dentistry is one of the proposed by the Government: a sum of treatment and the capitation and fee
co-ordination of healthcare, including last bastions of mass intervention for individual GDPs to pay back for scale for children was replaced by three
the possibility of mass inoculation. rather than a targeted approach which, the “overpayment” in 1991/92 (later treatment bands and urgent treatment.
So where is the market failure in given historically low levels of patient dropped) and a cut in fees as the fee This allowed for “rationalisation” of
dentistry that warrants government charges, leads to a low valuation by the scale introduced in October 1990 was patient charges for adults from one
intervention beyond the regulation of consumer. still in place and already delivering an based on 80 per cent of the fee, up to a
those who can practise dentistry? “overpayment” from the start of maximum of £378, to one synonymous
Certainly, there is a public dental The 1990 contract 1992/93. with the treatment bands – band 1:
health role in the provision of oral Before looking at the current The profession’s negotiating team £15; band 2: £42.40; and band 3: £189.
health education or possibly dental care situation, it is worth considering what from the General Dental Services Responsibility for commissioning
for children in “need” but where happened during the previous period Committee (GDSC) was in the driving dental services was devolved to
parents do not translate this into of major disequilibrium caused by the seat as the longer the year went on the primary care trusts (PCTs).
demand. introduction of the 1990 NHS greater the fee cut necessary to get Contract values, awarded to practices

DP July 09 4,6-7,21,24,26-27,34,6 6 24/6/09 11:11:38
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