The unique characteristics of dental disease, such as its predictability, non-communicability, ease of diagnosis, and its extensive prevention possibilities, should result in greater cost control and an expectation of a better operation of the market mechanism than in general health care. These differentiating features, however, also increase the likelihood that services are over-consumed and/or over-provided. The most influential feature determining efficient resource use in health care provision is the type of payment system. A per capita system severs the link between the dentist’s future income and service provision and provides equity in terms of coverage and access. The result is that patients may benefit from fewer unnecessary treatments, and encounter more preventive activities. The system is limited by the potential for under treatment and problems with patient selection.
With fixed salary the dentist’s income is independent of service provision, with incentives for low production, which leads to high costs per patient. Salaried dentists generally provide more prevention services, and allow the targeting of services to priority or “special needs” groups. The patient benefits from the greater equity of a service and the location of services can be determined by community needs. Fee-per item is the most common payment system in dental service provision for adults, where the dentist is rewarded according to the amount of work undertaken. Fee-per item removes the incentive for supervised neglect or to cherry pick patients. It also solves the problems of patient selection and under-treatment, associated with capitation financing. Fee-per-item can encourage the use of services by patients on the advice of the dentist with the result that costs can be inflated with little impact on oral health itself. In the absence of a system of probity dentists can manipulate demand and set fees, and provider moral hazard can occur in the form of supplier inducement. The optimal dental contract may be a ‘blended’ payment system whereby dentists receive a proportion of their income through capitation, a proportion from allowances and proportion from fee-per-item of service.