Effects of occupational regulations on the cost of dental services: Evidence from dental insurance claims

In the United States, occupational regulations influence the work tasks that may legally be performed by dentists and dental hygienists. Only a dentist may legally perform most dental procedures; however, a smaller list of basic procedures may be provided by either a dentist or a dental hygienist. Since dentists and hygienists possess different levels of training and skill and receive very different wages, it is plausible that these regulations could distort the optimal allocation of skills to work tasks. We present simple theoretical framework that shows different ways that such regulations might affect the way that dentists and dental hygienists are used in the production of dental services. We then use a large database of dental insurance claims to study the effects of the regulations on the prevailing prices of a set of basic dental services. Our empirical analysis exploits variation across states and over time in the list of services that may be provided by either type of worker. Our main results suggest that the task-specific occupational regulations increase prices by about 12%. We also examine the effects of related occupational regulations on the utilization of basic dental services. We find that allowing insurers to directly reimburse hygienists for their work increases one year utilization rates by 3-4 percentage points.