The Impact of Insurance Expansions on Supply-Side Behavior in Dentistry

To date, there has been little evidence provided for how supply-side decisions and treatment behavior by providers adjust to insurance coverage expansions.  Furthermore, the literature has primarily stemmed from analysis of either self-reported data from providers or from survey data not designed to capture changes in provider behavior.  There is also a large amount of variation across state legislation in scope of practice laws for various levels of providers, which may affect how providers can readily respond to insurance expansions.  To rectify this gap, I examine how treatment decisions among dentists respond to a sudden influx of privately insured patients stemming from a 2010 dental insurance expansion that was largely unexpected by dental providers, interacted with state legislation impacting the costs of expanding dental practices.

I propose a simple extension to McGuire and Pauly’s 1991 model on provider behavior incorporating the costs of expanding capacity and moral hazard to demonstrate how coverage expansions may interact with scope of practice laws.  I find that predictions for the continuously insured, who are not facing large changes in coverage design, are unambiguous due to the absence of moral hazard.  I hypothesize as a result that 1) dentists facing a larger coverage expansion will have larger changes in their treatment behavior for the continuously insured, and 2) that increased costs from expanding capacity place an additional pressure on treatment behavior. 

To carry out the analysis, I use two sources of novel, proprietary data, which are 1) detailed 2001-2014 claims-level data from employer-sponsored dental plans administered by Delta Dental of Michigan (DDMI) and 2) 1999-2014 claims data across all insurance types (private, public, and uninsured) for a set of large dental practices primarily serving the University of Pennsylvania’s faculty, students, and staff (Penn Dental clinics).  The DDMI data allows me to leverage variation in state legislation impacting capacity for dental providers, as well as variation across markets in the penetration of the dental insurance expansion through large employers.  The variation in the size of the dental expansion was largely unexpected by dental providers, providing an exogenous source of variation for clean identification.  The Penn Dental data allows for a practice-level analysis of how treatment decisions are changing across patients of different insurance statuses, before and after the insurance expansion.  Because around 40% of patients seen in dental clinics are uninsured, the Penn Dental data provides the first look in the literature at how severity, prices, and treatment decisions differ among uninsured, publicly insured, and privately insured patients in response to a dental insurance expansion. 

This study will evaluate the effects of dental insurance expansions to help address the policy-relevant question of whether dental benefits should be a part of Medicaid expansions or required for purchase in the health insurance exchanges, as is currently the case in some state-run exchanges.  Furthermore, because there are parallels between the dental and medical industries in the scope of provider agency, this research can also be applied to health care more broadly.