Designing an Optimal Financing Mechanism for Dental Care Among the Elderly: Reducing the Costs Associated with Information Assymmetries

In this project, we will document costs and health outcomes associated with various financing mechanisms for delivering dental care to individuals age 65 and above. In addition we will analyze the cost-effectiveness of existing financing mechanisms and additional mechanisms developed for this research to deliver dental care to the elderly. Key to evaluation of financing mechanisms is an understanding of the roles of information asymmetries, which can drive up insurance premiums and result in the less than the socially optimal quantity of insurance purchased and utilization of dental services. The basic framework of the project is an optimization model that minimizes the total cost of dental services subject to receipt of primary and secondary prevention equaling its highest feasible value. We will use this optimization model to compare existing financing mechanisms for dental care as well as hybrid and new mechanisms designed in this research.

The delivery of health services in the United States is considered by many to be at a crisis point due to both the continued rising costs and disparities in the health status and receipt of preventive care between the poor and wealthy. One area of health service for the elderly that is often ignored is dental care where the rate of inflation has recently outpaced the medical care inflation rate. Approximately $61 billion is spent annually on dental care. In this research we will estimate the impact that the lack of dental insurance has on disease, determine how effective various forms of health allocation are, develop strategies to improve this allocation, and design a framework to analyze costs which may be generalized to other areas of health care. For example, as health care costs incurred by the elderly increase, there will be increasing pressure to extend Medicare coverage, e.g. prescription drugs. However, there are unique characteristics to the elderly that may make allocation difficult. Many similar issues exist for the low-income population.