Dental Economics and the Aging Population

The baby boom generation, as defined by the U.S. Census Bureau, is comprised of Americans born during the 18 years following World War II between 1946 and 1964, although the term baby boomers is often applied more broadly within cultural or marketing contexts. In 2009 baby boomers were between 45 and 63 years old and constituted approximately 78 million, or about one in four Americans. The relative cohort size combined with increases in longevity will make the 65-and-older age group a rapidly growing segment in the next few decades, increasing its portion of the general population from 12% in 2000 to a peak of 20% by approximately 2035.² To accommodate the oral health needs of a growing senior population, the financing options of dental care will need to be broadened and dental professionals likely will need to alter the dominant patterns of practice and business operations.^1,3

The Lag Between Dental and Other Healthcare Expenditures
As with other healthcare segments, total national spending on dental services has been growing. Dental expenditures have not grown as fast as other types of healthcare spending, however, and have slipped from 6.1% of all personal healthcare expenditures in 1982 to 5.1% in 2007. Spending on professional services and institutional care (hospital, nursing home, and home care) has consistently comprised the bulk—approximately 85%—of personal healthcare spending in the past two decades (Figure 1). In the last 10 years, spending for dental care has grown much more slowly, notably overtaken by prescription drug expenditures.

Moderate Growth of Dental Prices
Coincident with the nominal spending growth at different rates for each healthcare segment, dental fees charged to consumers within each segment have increased. Because healthcare segments are each subject to varying market environments and technological changes, they have experienced diverse rates of inflation. The plotting of the Consumer Price Index (CPI) component specific to each healthcare segment reveals that institutional care prices, for example, have grown faster than personal healthcare prices overall, while fees for professional services have increased more slowly. Dental services price levels have grown at a rate just below the average for all personal healthcare. The overall average for personal healthcare has risen much faster than the average for all consumer items, nearly quadrupling in the past 25 years, versus doubling for all items (Figure 2).

Flat Per Capita Dental Spending
Secondary to the effects of inflation and population growth is the general shift from institutional care spending toward professional services. Medical care is increasingly delivered in outpatient care settings, often in physician offices or surgical care centers, which can be seen in the crossing of the real spending trends for institutional care and professional services that occurred in about 2000 (Figure 3). Unlike other professional services, dentistry has not gained from the shift toward outpatient/professional services, having remained flat in real per capita spending for the past 25 years. Thus, while prices for dental services have grown generally as fast as the average for all personal healthcare services, dentistry has neither lost nor gained real ground in per capita use. Whether dentistry will continue to maintain its relative position in per capita utilization depends, at least in part, on how the baby boom demographics will impact dental care demand in the next two decades.

Influence on Projected Expenditures
Dentistry’s share of all personal healthcare spending has slipped in the past 25 years by about one percentage point to 5.1% in 2007; this trend is expected to continue through the year 2018, the latest year for which the Centers for Medicare and Medicaid Services (CMS) has made projections, to about 4.4%.⁴ By 2018, real (inflation-adjusted) dental spending is projected to increase to about 26% above its level in 2003, while overall spending for personal healthcare will grow to 51% above its 2003 level. As a reference point, real gross domestic product (GDP)—a general measure of all income, or the economy—will grow to approximately 45% beyond its 2003 level (Figure 4).

One important reason for dentistry’s slower projected growth is that dental services are financed by higher shares of out-of-pocket expenditures. The higher out-of-pocket burden tends to make the demand for dental services more price and income elastic—that is, the quantities of dental services that are demanded fluctuate in greater proportion to changes in prices and income. The CMS projection illustrates the higher income elasticity of demand for dental services, compared with overall personal healthcare spending. The 2009 recession, shown by the dip of real GDP below its trend in Figure 4, coincides with a similar divergence in the growth trend of real dental spending. The growth paths of the other major healthcare segments are not as impacted by the reduction in national income, reflecting the relative inelasticity of spending in those segments with respect to income changes.

Difficulty Maintaining Dental Spending
Most dental coverage in the United States is obtained through employer-offered plans, and basic Medicare does not include such benefits. Seniors’ spending on dental care is, therefore, more sensitive to income than spending by younger age groups. In 2006, for example, about 68% of dental expenditures were paid out-of-pocket for those aged 65 and older. This compares with approximately 45% paid out-of-pocket for those in age groups 41 to 50 years (the youngest baby boomers) and 51 to 60 years (the oldest) (Figure 5).⁵ However, seniors accounted for only 16% of overall medical expenditures out-of-pocket, given that much of their other healthcare expenditures are covered by Medicare or private insurance.⁴ The higher out-of-pocket expenditures for dental care underscore the fact that government spending for dental care is limited, comprising only 6% of total dental expenditures in 2007, compared with the government carrying 46% of overall healthcare expenditures. Conversely, private insurance payments for dental care comprised 49% of total dental spending in 2007, compared with 35% of overall health expenditures. Although individuals are more able to maintain expenditure levels on other types of medical care into retirement, they are less able to maintain dental expenditures, especially as fewer companies each year offer dental benefits to retirees.⁶

Dentistry’s greater reliance on discretionary personal income is a key vulnerability to its profit margin as baby boomers age and retire. This vulnerability is further underlined by Medicare’s exclusion of general dental benefits. It is unclear how much or how willingly boomers will spend on dental care as they transition to retirement, compared with prior cohorts of retirees, given recent economic setbacks in the housing and stock markets, which are important sources of boomers’ retirement funds.

The Threat of Financial Uncertainties
By many accounts, most baby boomers will have adequate resources to finance their retirement, whether judged in absolute terms by comparison to the poverty line or median income or in relative terms by comparison with previous cohorts.⁷ They are, however, exposed to greater risks of financial shortfalls than previous cohorts for several reasons. First, boomers rely more on their home equity than previous population cohorts have. Given the slide in home values in the previous 5 years, the oldest boomers may have a significant net decline in retirement wealth.⁸ Second, compared with previous generations who have received defined benefit plans (employer pensions), boomers will rely much more heavily on defined contribution retirement plans, such as 401(k) plans. Given the stock market declines in late 2008, this greater reliance on uncertain financial markets brings risks that previous retirees did not have, which will in turn dampen seniors’ propensity to spend on discretionary items. Third, just as they are reaching their peak earning years before retirement, many boomers may need to take time from their jobs to help care for their parents. Increased life expectancy increases the chances that boomers will outlive their retirement resources.⁹ Some have argued many of the oldest boomers will need to work a few years beyond traditional retirement age to adjust for these factors.

Boomers Are Key to Dental Practice Finances
Baby boomers comprise about 30% of all general dental patient bases, which is approximately equal to their 28% share of the population (Table 1). In 2006, boomers were in their 40s and 50s, (51 to 60 for early boomers and 41 to 50 for late boomers). They spent approximately $20 billion on general dental services, or about $540 per patient per year.⁵ Similar to children and teenagers between ages 5 and 17 years, those in their 40s and 50s are most likely to visit a general dentist. Because boomers spent considerably more than the average of $452 per patient per year on general dental services, they comprised 37% of all expenditures, significantly more than their share of the patient population.

Boomers’ Importance in Retirement
As restorative dental needs increase with age, visitation rates also grow until retirement, when visit rates begin to drop slightly (Table 1). As patients age, they tend to spend more for general dental work, which is a pattern that extends into the senior years (age 61 years and older) (Table 1). In 2006, seniors comprised about 17% of the population and have a similar share of general dentistry’s patient population; they contributed about 23% to total dental spending. Older age groups purchase higher-value services and are important components of dentistry’s patient base. The boomer cohort will pay more out-of-pocket services as its members become seniors and thus become more sensitive to relative prices. Consequently, these individuals will be an important source of overall demand for dentistry.

A simple projection for the next 20 years shows the growing importance that seniors will have for dentistry’s bottom line. Based on today’s visit rates and average expenditures by age shown in Table 1, seniors (age 61 and older) will increase their contribution of 23% of total expenditures in 2006 to 28% in 2018 and to 32% in 2030 (Figure 6). The expenditure shares of the 41- to 60-year age groups, which included most boomers in 2006, will decline from 37% in 2006 to 34% in 2018 and 31% in 2030. The key question underlying the projection is whether future seniors will visit general dental practitioners and purchase services at the same rate as current seniors.

Growth of Seniors’ Demand for Services
Although some disparities persist, oral health has improved for most Americans in the past two decades. Seniors have lower rates of edentulism and periodontitis, and working-age adults have improved periodontal health and tooth retention, as well as lower rates of dental caries.¹⁰ With age, baby boomers will bring greater need for general dental attention than past cohorts of seniors. This is partly because they will have better oral health histories and lower rates of edentulism and a growing clinical awareness of the associations between oral health and overall health.¹¹

Chronic Conditions Boosting Demand
Nearly one third of seniors have heart disease, which is commonly associated with atherosclerotic disease, and almost one in five people have received a diagnosis of diabetes (Table 2).¹² An estimated 15% of the overall population has low bone mineral density (osteopenia or osteoporosis), most of whom are females older than 50 years.¹³ As the senior population grows, dental practitioners will become increasingly involved in identifying symptoms of chronic systemic conditions and integrating dental care within the context of medical treatments.

Recent research has contributed to a growing awareness that oral health and overall health are closely linked both symptomatically and causally. Often, these associations occur in patients with chronic conditions, such as atherosclerotic disease, diabetes, and osteoporosis—all of which disproportionately affect seniors.

Atherosclerotic Disease
Periodontal inflammation is associated with an elevated systemic inflammatory state and increased risk of major atherosclerotic events, such as myocardial infarction and stroke, as well as altered glycemic control in people with diabetes. Interventional trials suggest periodontal therapy, which decreases the intraoral bacterial bio-burden and reduces periodontal inflammation, can significantly impact the systemic inflammatory status.¹⁴ There is insufficient but suggestive evidence for a possible causal relationship between periodontal and atherosclerotic diseases (including ischemic heart disease, peripheral arterial disease, and ischemic stroke), with slightly stronger evidence for ischemic stroke.¹⁵ If future studies show consistent associations, periodontal disease may be elucidated as an independent and potentially modifiable risk factor for atherosclerotic disease.

Diabetes
Evidence consistently reveals diabetes is a risk factor for increased severity of gingivitis and periodontitis.^14,16 Conversely, periodontitis is a risk factor for worsening glycemic control in patients with diabetes and may increase the risk for diabetic complications.^14,16,17 Evidence suggests periodontal therapy is associated with improved glycemic control in many patients with diabetes and periodontal disease.^14,16 While the association between periodontal disease and several chronic systemic conditions has been demonstrated in recent years, the most consistently supported interaction has been between periodontal disease and diabetes.^14,16,17 Because inflammatory periodontal disease and diabetes are closely linked, dental and medical teams must work together to provide optimal care for their patients with diabetes.

Osteoporosis
The dental team also may be in the position to suspect or help identify osteoporosis. Such a suspicion would be based on risk factors identified in the patient’s medical history, as well as clinical and radiographic findings. In patients with osteoporosis, the jaws are susceptible to accelerated alveolar bone resorption, and these patients have a greater incidence of tooth loss and residual ridge resorption.^18-21 Osteoporosis may affect the severity of pre-existing periodontitis.^18,20,23

It is not entirely clear how much the aging baby boomer generation will impact dentistry in the next 10 to 20 years. However, some changes to current practices will be inevitable. In general, retired boomers will require more dental services than previous senior cohorts and purchase more intensive services than younger patients. However, their ability to afford these needed services may be limited. As such, they present both a challenge and an opportunity to the practice of dentistry in terms of minimizing the financial impact for practices and maintaining oral and overall health for seniors. The oldest boomers may face greater uncertainties regarding the adequacy of their retirement funds and will likely exhibit wider disparities in wealth and income compared with previous senior cohorts. Consequently, the lack of dental coverage and rising healthcare costs could put less affluent seniors at risk for inadequate access to dental care. Recognizing the growing numbers of seniors among their patient population and the impact that dental services can have toward improving their oral and overall health, the dental team must consider how to promote seniors’ continued access to dental services now and in the future.

Dr. Steinberg is a member of Dentra’s Advisory Board.

Deron A. Ferguson, PhD
Senior Health Data Analyst
Dentra
Seattle, Washington

Barbara J. Steinberg, DDS
Clinical Professor of Surgery
Drexel University College of Medicine
Philadelphia, Pennsylvania

Adjunct Associate Professor of Oral Medicine
University of Pennsylvania, School of Dental Medicine
Philadelphia, Pennsylvania

Tina Schwien, MPH, MN
Product Marketing Manager
Dentra
Seattle, Washington