Over-treatments, an overlooked epidemic

Moral hazard in dentistry arises from a principal-agent problem, where dentist, in the role of an agent, acts on behalf of patient, called the principal. The agent usually has more information about his or her actions or intentions than the principal does. The agent may have an incentive to act inappropriately (from the viewpoint of the principal) if the interests of the agent and the principal are not aligned.

Like any agent, dentists are able to exploit information advantage for their own interest. There is strong evidence that they do. In a study conducted by ETH Zurich in 2017 in Switzerland, 28% of dentists has recommended unnecessary treatments to the patient. Dental exploits are often publicized by major American media, including Reader’s Digest and Atlantic.

“An exclusive undercover investigation by Reader's Digest reveals that there are startlingly inconsistent diagnoses from one dentist to the next -- and an astounding disparity in the fees they charge. Before setting off on his 28-state investigation, award-winning journalist William Ecenbarger underwent a series of exams by an independent panel of distinguished dentists with no financial interest in the state of his teeth. Their consensus was that work was needed on just one molar, and perhaps a second. Estimated fair cost: around $500, up to $1,500 at most.

Then, Ecenbarger went to 50 randomly selected dentists with a set of X-rays and told them all the same story: that he was new to the area, wanted to maintain good oral health, and needed their opinion on what had to be done. He also mentioned that his dental costs were covered by a direct-reimbursement plan.

Some of the recommendations were reasonable. Many were outrageous, including a Memphis dentist who said Ecenbarger needed crowns on all 28 of his teeth at a cost of more than $13,000, a Salt Lake City practitioner who said he needed a full-mouth reconstruction for nearly $20,000, and a Park Avenue, New York dentist who estimated $29,850 for 21 crowns plus veneer on six lower teeth.  And, adding insult to injury -- 15 of the 50 dentists missed the original molar problem entirely, and less than half did oral-cancer and periodontal screenings recommended as part of any thorough exam.

Inappropriate acts include harmful and unwanted activities such as over-treatment, bad treatments, misrepresentation of services, etc. There are different causes of such situations, including lack of knowledge and/or experience, tiredness, incapacity, neglect and fraudulent intent.

According to the National Health Care Anti-Fraud Association, of the $250 billion spent on dental care procedures annually in the US, an estimated $12.5 billion, or 5%, is lost to dental fraud and abuse. However, this data is mostly showing fraud cases related to claim misrepresentation and doesn’t provide any real insight into actual cost of over-treatments. 

There is a reason to believe that over-treatments are the main way of defrauding insurance and patient in dentistry. The best available indication for this is the result of the research study from ETH Zurich:

“We present the results from a field experiment in the market for dental care in Switzerland, for which a single test patient who did not need a treatment undertook 180 dentist visits. We provide direct evidence that over-treatment is an important phenomenon: The test patient received an over-treatment recommendation on more than every fourth visit. We also find a striking heterogeneity in treatment recommendations, with over-treatment recommendations ranging from one to six fillings at individual dentists and at least 13 different teeth recommended to be treated across the study, leading to treatment costs of on average CHF 535 (about $550) conditional on over-treatment.”

There are different possible reasons why overtreatment is frequent in dentistry, and more so than in the rest of the healthcare. We believe the main reason is the fact that unlike general physician, a dentist is the one person which makes both a recommendation and performs the treatment. Their profit is directly impacted by the total cost of treatments they perform. If they do more expensive treatments, they earn more money. This means that they are strongly incentivised to do more treatments. Information asymmetry and the nature of creedence good create an opportunity for dentist to perform unnecessary treatments easily and without risk, while their business model provides the incentive to do so.

Complexity of multi-sided dental market (patient, employer, insurance, dentist) makes it even easier to get away with such predatory behavior. Similar effect comes from the fact that patients rarely change dentists and insurance plan providers.