HE A S S O C IA T IO N Dentists incomes, fees, practice costs, and the Economic Stabilization Act: 19 52 to 1976 B u r e a u o f E c o n o m ic a n d B e h a v io r a l R e s e a r c h D a r i n g th e 1960s and 1 970s, in flation has been a p ro m in ent natio n al concern th a t has dealt heavy blow s to virtu ally all segm ents of our society. T he h ealth care sector, as one of th e lead in g in flation setters, co n tin u es to be a focal p o in t of C ongressional deb ate, p r e s id e n tia l p la tfo rm s, a n d reg ulatory revision. D entistry, as a p ro m in ent m em ber of the h ealth p ro fessions, h as generally prevailed as th e ex cep tio n, w ith in flatio n rates w ell below th e average of all h ealth serv ices. B ut d en tistry h as sh ared w ith all health professions the b u r den s of regulatory reform aim ed at red u cin g th e rising costs of h ealth care. T he 1971 Econom ic Stabilizatio n Act, w ith its four phases of fee controls an d guid elin es, is a vivid exam ple of com prehensive reform. As d en tistry considers its future, it is im p o rtant to review th e evidence for th e past tw o dozen years. T his period is p articu larly revealing because it in clu d es a variety of p u b lic p o lic ie s a n d e v e n ts, s u c h as tw o w ars, a m ajor recession, the en d of th e draft, and th e first p rice control program du ring peacetim e. T h is stu d y presents discussio n s of d en tistry s record betw een 1952 and 1976 an d p articu larly focuses on the p erio d im m ediately before, d u rin g, an d after th e Econom ic S tabilization Act. A detailed exam ination of p ractice costs in th e form of a revised p rice ind ex is p resen ted as an in tegral p art of th e analysis. T his Price Index of Cost of C onducting a D ental P ra c tic e rep rese n ts th e c o n tin u a tio n of th e cost index first p u b lish ed by th e A m erican D ental A ssociation in th e 1975 Survey o f D e n ta l P ra c tic e. Dentists incomes and inflation As en trepreneu rs, in d e p en d e n t d en tists ty p ically receive n o salary but have resid u al claim s on th e incom e of th e ir practices after all expenses h av e b een m et. T he in c o rp o ra te d practice is th e exception as d en tists p ay th e ir ow n salaries an d (rarely) d iv id ends. To m easure the d e n tis t s m onetary rew ard from a y ear s p ractice, th e Survey of D ental Practice perm its consideration of both incorp o rate d a n d u n in c o rp o ra te d p ra c tices; th e survey uses th e m ean of all d e n tists n et incom es an d salaries of corporation ow ners. (Data are lim ited to th e records of only in d ep en d en t practitio n ers an d exclude salaried, non o w ner d entists from th e calculations.) T he rep o rted m ean n et incom e m easures th e m onetary rew ard s of th e in d e p en d e n t d en tist for each respective calendar year. F igure 1 presents th e estim ates of m ean n et incom es for all in d e p e n d e n t an d n o n salaried d en tists (in c lu d in g g en e ral p ra c titio n e rs an d sp ecialists) for th e p erio d from 1952 to 1976. T he full height of each colu m n rep resents incom es th a t w ere taken d irectly from each Survey of D ental Practice. T he shaded p o rtions rep resent incom es th at w ere ad ju sted for th e effects of inflation (th at is, in com es th at w o u ld have been reported h ad general prices rem ained at their 1952 levels). In 1 976, for exam ple, d e n t i s t s n e t in c o m e r e a c h e d $ 4 2,0 3 5, b ut m ost o f th is is attrib u ted to in flatio n. H ad th ere been no in flatio n since 1952, d en tists w o u ld have reported an incom e of $19,6 0 0. Both of th e 1974 figures ($ 3 4,0 0 0 a n d $ 1 8,3 0 1 ) re p re s e n t a d e c lin e from th e resu lts of p revious surveys. W hen adjusted for inflation, th e declin e in d e n tists p u rch asin g pow er is m ore severe a 19% decrease. By 1 976, d e n tists incom es, adju sted for inflation, h ad appro ach ed th e 1967 level. In 1 9 7 6, d entists could p u r c h a se a b o u t th e sam e a m o u n t of com m odities an d services th at they h ad n in e years earlier. To u n d erstand th e u ltim ate cause of th e 1974 decline, w e m u st exam ine th e relatio n sh ip betw een d e n tists incom es an d th e level of econom ic activity in th e U nited States. Dentists incomes and the GNP T he m ost w id ely accepted m easure of general econom ic activity is the g ro ss n a tio n a l p ro d u c t (G N P) a d ju sted for th e effects of in fla tio n. M o st in d u s t r ie s a re a ffe c te d b y changes in th e GNP, and it is useful, in attem pting to evaluate th e n et in com e series, to estim ate th e sensitiv ity of d e n tists n e t incom es to the changes. W ith th is estim ate, w e can m ore readily assess th e im p o rtance of th e E conom ic S tabilization A ct an d periodic recessions. T h e p a tte rn o f a n n u a l ra te s of change in d e n tists n et incom es an d th e GNP (Fig 2) show s, w ith th e exceptio n of th e p erio d from 1972 to 1 9 7 4, a clear, d ire c t rela tio n sh ip. JA D A, V o l. 9 9, N o v e m b e r 1 9 7 9 8 5 7
42,035 K 40,000 Inflation relative to 1952 w 30,000 (4 CD OQ 20,000 Net income (constant dollars) 30,770 10,000 1952 1955 1958 1961 1964 1967 1970 1972 1974 1976 Fig 1 Dentists mean net incomes: independent and nonsalaried private practitioners, 1952 to 1976 (constant dollars, 1952 = 100). (Sources: Survey of Dental Practice, all issues, American Dental Association; Bureau of Labor Statistics, US Department of Labor.) W h e n th e G N P in cre a s e s at a fa ste r ra te, d e n tis ts in c o m e s re s p o n d s im i l a r l y. N o t ic e th e lo w f ig u r e f o r c h a n g e s in th e G N P in th e p e rio d fr o m 1 9 5 5 to 1958. T h e re c e s s io n in 1 9 5 7 to 1 9 5 8 ( w h ic h e x p la in s th e lo w ra te o f c h a n g e fo r th e G N P ) seem s to h a v e c o n trib u te d to th e d e c lin e in th e n e t in c o m e f ig u r e. S im ila r ly, th e b o o m p e rio d th a t o c c u rre d in 1965 to 1966 a p p e a rs to h a ve c o n trib u te d to! th e ra p id ris e (6.5 % ) in d e n tis ts in com es. F ig u re 3 illu s tra te s th e c lo s e re la tio n s h ip b e tw e e n ch a n g e s in th e GNP a n d ch a n g e s in d e n tis ts n e t in c o m e s (b o th are a d ju s te d fo r in fla tio n ). A tre n d lin e is in c lu d e d in th e fig u re a n d is based o n a s im p le re g re s s io n e q u a tio n th a t c o n s id e rs th e p e rio d fro m 1972 to 1974 in d e p e n d e n tly. In th is w a y, i t ca n be d e te rm in e d i f th e p e rio d fro m 1972 to 1974 w a s a ty p i cal. T h e tr e n d lin e s u p p o rts th e e x p e c te d d e p e n d e n c e o f n e t in c o m e o n g e n e ra l e c o n o m ic a c tiv ity. T h e est im a tin g e q u a tio n su g g ests th a t a 1% in c re a s e in th e ra te o f c h a n g e in th e GNP p ro m o te s a 0.7 5 % in c re a s e in th e ra te o f ch a n g e in d e n tis ts n e t in com es. T h e tre n d lin e s u c c e s s fu lly e x p la in s 9 6 % o f th e v a ria tio n in A!-'- I f 1 i 11 / 3.5 1952-1955- 1958-1961- 1955 1958 1961 1964 1 967 1970 1972 1974 1964-1 9 6 7-1970- 1972-1974- 1976 I S [ 0 Rate of change in GNP Rate of change in dentists mean net incomes 8 5 8 J A D A, V o l. 99, N o v e m b e r 1 979 Fig 2 Annual rates of change in dentists mean net incomes and GNP (constant dollars). (Sources: Survey of Dental Practice, all issues, American Dental Association; Survey of Current Business, selected issues, US Department of Commerce.)
th e rates o f ch a n g e in d e n tis ts n e t in com es. T h e p e rio d fro m 1972 to 1 9 7 4 is u n u s u a l as i t is so c o n tra ry to th e g e n e ra l tre n d. T h e ra te o f in c re a s e in th e G N P w a s p o s itiv e (1.8 % ), w h ic h in its e lf suggests th a t d e n tis ts n e t in co m e s s h o u ld h a v e in c re a s e d. Y e t, th e re g re s s io n e q u a tio n in d ic a te s th a t th e ra te o f ch a n g e in d e n tis ts i n co m e s is 1 2.7% b e lo w th e tre n d lin e. W e ca n, th e re fo re, in fe r th a t th e E c o n o m ic S ta b iliz a tio n A c t c o v e rin g th e p e rio d fr o m 1971 to 1974 la rg e ly e x p la in s th e r a p id d e c lin e in d e n tis ts p u rc h a s in g p o w e r. B ecause th is a ct h a d s u c h a s tro n g im p a c t o n d e n tis ts, i t is w o r t h w h il e to e x a m in e th is p e rio d m o re c lo s e ly. Economic Stabilization Act and dentists incomes A s m o s t d e n ta l p ra c titio n e rs w i l l re c a ll, o n A u g 1 5, 1 9 7 1, P re s id e n t N ix o n a n n o u n c e d th e im p le m e n ta t io n o f P h a s e I o f th e E c o n o m ic S ta b iliz a tio n A c t w h e n, fo r th e fir s t tim e s in c e th e p e rio d a fte r W o r ld W a r II, d e n tis ts fees w e re c o n tro lle d b y th e fe d e r a l g o v e r n m e n t. P h a s e I p la c e d a freeze o n fees c h a rg e d a n d w a s fo llo w e d b y th re e phases o f fee g u id e lin e s m a n d a tin g a llo w a b le i n cre a se s u p to a p e rc e n ta g e d e te r m in e d b y th e P re s id e n t s C o u n c il o n W a g e a n d P ric e S ta b ilit y. U n lik e m o s t o th e r se cto rs in th e e c o n o m y, d e n tis tr y s fee g u id e lin e s w e re n o t re la x e d u n t il th e E c o n o m ic S ta b iliz a t io n A c t e x p ire d. D u r in g Phase I I I a n d IV o f th e act, th e A D A f ile d s u it a g a in s t th e C o u n c il o n P ric e a n d W a g e S ta b ility. In s u p p o r t o f th e s u it, th e A D A p re s e n te d a rg u m e n ts d e s c rib in g a co st- p ric e squeeze. D u r in g th e se tw o p h a ses, th e u n it costs o f p ra c tic e in p u ts (s u c h as ra te s o f e m p lo y e r w a g e s a n d th e p ric e o f g o ld ) in c re a s e d fa s te r th a n th e a llo w a b le in c re a s e in fees. W it h c o n tin u e d c o n tro l o n fees, d e n tis t s in c o m e s s u ffe re d r e la tiv e to th o s e o f o th e r s e c to rs. P ric e s a n d w a g e s p a id b y d e n tis ts h a d b e g u n th e ir c a tc h -u p p e rio d e a rlie r th a n d id d e n ta l fees. T o e x a m in e th e s u b sta n ce o f th is in c o m e squeeze, th e fo llo w in g sectio n o ffe rs a d e ta ile d a n a ly s is o f d e n ta l p ra c tic e costs, fees, a n d d e n tis ts in c o m e s. T o m e a s u r e i n f l a t i o n a m o n g p ric e s a n d w a g e s th a t d e n tis ts.5-3 c3< -6-8 -9-10 1955-1958 1 2.7 % 1 9 7 4-1 9 7 6 1967-1970 * 1972-1974 1952-1955 1970-1972 1964-1967 1961-1964 Annual rates of growth in GNP (%) Estimated regression equation: Y=1.235 +.746X - 12.688D r2 =.960 where Y=rate of growth in dentist mean incomes X = rate of growth in GNP D=1 if within Economic Stabilization Act 0 if otherwise Fig 3 Estimated relation betw een annual rates o f growth in dentists m ean net incom es and GNP (constant dollars). (Sources: Survey of Dental Practice, American Dental Association; Survey of Current Business, US Department of Commerce.) m u s t p a y, a p ric e in d e x w a s d e v e l o p e d ; t h is in d e x is d is c u s s e d a t le n g th. T h is in d e x re p re s e n ts a r e v i s io n a n d u p d a te o f th e P ric e In d e x o f C o st o f C o n d u c tin g a D e n ta l P ra c tic e p u b lis h e d in The 1975 S u rv e y o f D ental P ra c tic e. T h e re v is e d a n d u p d a te d p r ic e in d e x is c o m p a re d w i t h d e n t is t s fe e s a n d in c o m e s th ro u g h o u t th e p e rio d fro m 1 9 7 0 to 1976. Price index of practice costs T h e p u rp o s e o f a p ric e in d e x is to m e a s u re o b s e rv e d c h a n g e s in th e p ric e le v e l. H is to r ic a lly, m o s t in te r e st in p ric e ch a n g e s has fo c u s e d o n th e w e ll- k n o w n C o n s u m e r P r ic e In d e x (C P I) m a in ta in e d b y th e U S D e p a rtm e n t o f L a b o r. T h e C P I is based o n a s a m p le o f c o m m o d itie s a n d s e rv ic e s c o m m o n ly p u rc h a s e d b y th e ty p ic a l A m e ric a n fa m ily. I f th e b u lk o f p ric e s in cre a se s, th e C P I re g is te rs s u c h in cre a se s as a n in d ic a tio n o f th e e x is te n c e a n d s e v e rity o f in fla tio n. A s a n im p o r ta n t c o m p o n e n t o f th e C P I, d e n tis ts fees are re c o rd e d as th e s in g le a u th o rita tiv e m e a s u re o f in fla tio n in th e d e n ta l sector. In 1 9 7 5, th e B u re a u o f E c o n o m ic R ese a rch a n d S ta tis tic s o f th e A D A (th e c u rre n t B u re a u o f E c o n o m ic a n d B e h a v io ra l R e s e a rc h ) in it ia t e d d e v e lo p m e n t o f a p r ic e in d e x th a t m e a su re s th e u n it costs o f c o n d u c t in g a d e n ta l p ra c tic e to in c lu d e a ll w a g e s a n d p ric e s o f m a te ria ls a n d e q u ip m e n t r o u tin e ly p a id in th e p ro v is io n o f d e n ta l care. P ra c tic e in p u ts w e re s e le c te d to in c lu d e d e n ta l a u x ilia r ie s, o ffic e space, m a jo r e q u ip m e n t, s u p p lie s, u t ilit ie s, la b o ra to ry s e rv ic e s, taxes, le g a l s e rv ic e s, tra v e l, b u s in e s s in te re s t a n d in s u ra n c e, re p a irs, a n d b a d d e b ts. S o m e in p u ts w e re e x c lu d e d b e ca use o f th e ir m in o r re p re s e n ta tio n in th e to ta l costs o f p ra c tic e. T h e c o m p u te d p ric e in d e x o f p r a c t ic e c o s ts r e g is te r s m a jo r ch a n g e s in p ric e s a n d w a g e s p a id b y th e d e n tis t in th e c o n d u c t o f th e p r i v a te p ra c tic e. T a b le 1 p re s e n ts a lis t o f c o m p o n e n t p a rts o f th e o v e ra ll P ric e In d e x o f C o st o f C o n d u c tin g a D e n ta l P ra c tic e. U s in g 100 as a base fo r 1970, th e fig u re s illu s tr a te th e e x is te n c e a n d s e v e rity o f p ric e in cre a s e s a m o n g J A D A, V o l. 9 9, N o v e m b e r 1 9 7 9 859
Table 1 Price index o f practice costs (1970 to 1976) fo r general practitioners, sole proprietors, and solely owned corporations.* Item Relative importance (%) 1970 1971 1972 1973 1974 1975 1976 Office rent or equivalent mortgage 12.7 100.0 104.6 108.2 112.9 118.6 131.4 Utilities 5.3 100.0 106.9 111.6 117.9 139.6 169.8 Dental assistant s salary or wage 17.2 100.0 105.5 110.9 116.9 123.1 138.3 Secretary s salary or wage 9.1 100.0 105.2 110.9 116.6 122.7 137.0 Hygienist s salary or wage 7.2 100.0 105.3 111.0 116.9 123.1 135.1 Laboratory technician s salary or wage 2.0 100.0 108.4 117.5 127.5 138.2 169.5 Dentist s salary or wage 1.6 100.0 108.5 117.6 127.5 138.3 168.3 Employee benefits (not included in salary) 0.8 100.0 121.1 135.8 163.3 178.0 235.5 Insurance related to dental practice 1.3 100.0 106.8 119.0 118.3 130.1 170.7 Depreciation of dental and office equipment 4.2 100.0 98.3 103.8 104.7 111.4 135.6 Taxes on business and business property 2.7 100.0 97.6 103.9 104.8 109.6 90.0 Interest on business indebtedness 1.3 100.0 105.0 121.7 136.7 154.2 164.2 Repairs 0.8 100.0 102.0 117.9 116.5 136.3 152.3 Legal and professional fees 0.8 100.0 111.9 138.8 151.5 165.8 167.1 Bad debts from services 1.9 100.0 86.9 83.5 85.4 91.8 65.7 Travel to meetings, society dues, license fees, and so forth 1.8 100.0 114.7 121.7 128.2 140.8 192.5 Commercial dental laboratory charges 17.0 100.0 106.0 111.9 118.2 130.8 135.4 Drugs 1.9 100.0 101.2 101.8 103.1 111.4 132.4 Dental materials 7.7 100.0 102.4 104.9 108.9 122.9 135.9 Office supplies 2.7 100.0 103.2 105.0 113.0 133.1 151.5 A ll items 100.0 100.0 104.7 110.1 115.7 124.5 139.5 Survey of Dental Practice, 1975, 1977, American Dental Association. th e m a jo r c o m p o n e n ts. O v e ra ll, th e in d e x s h o w s a 3 9.5 % in c re a s e in p ric e s d u r in g th e p e rio d fro m 1 9 7 0 to 1 9 7 6. A m o n g th e le a s t s ta b le c o m p o n e n t p ric e s are e m p lo y e e b e n e fits, u t ilit ie s, la b o ra to ry te c h n ic ia n s, in su ra n c e, s a la rie d d e n tis ts, le g a l a n d p ro fe s s io n a l s e rv ic e s, b u s in e s s in te r est, a n d a m is c e lla n e o u s c a te g o ry o f tra v e l, s o c ie ty m e m b e rs h ip, a n d so fo rth. T w o m a jo r c a te g o rie s a p p e a r to h a v e h a d p ric e decreases ta xe s o n b u s in e s s a n d b u s in e s s p ro p e rty, a n d b a d d e b ts. T h e s e c o m p o n e n ts c o n jo in t ly re p re s e n t less th a n 5% o f to ta l o ffic e expenses. A s seen in T a b le 1, th e p r in c ip le s o u rc e o f d a ta fo r th e c a lc u la tio n o f th e p ric e in d e x is th e S u rv e y o f D e n ta l P ra c tic e. T h e q u e s tio n n a ire s u se d f o r th is s e rie s a re n o t id e a lly d e s ig n e d to c o lle c t in p u t p ric e s because e a ch re s p o n d e n t is a ske d to re c o rd h is to ta l o u tla y to w a rd in p u ts (s u c h as to ta l m o rtg a g e e xpense s) in s te a d o f p e r u n it e xpense s (s u c h as re n ta l p e r square fo o t). A s th e se to ta l o u t la y s are c o n v e rte d in to p e r u n it e x- p e n s e s, s l i g h t e r r o r s a r e i n e v it a b le e s p e c ia lly w h e n th e q u e s tio n n a ire is re v is e d a n d fig u re s th a t c a n be u s e d to c o m p a re d a ta fro m p re v io u s y e a rs are c a lc u la te d. T h e r a th e r d e m o n s tra b le ju m p in b e n e fits p e r e m p lo y e e a n d th e decrease in b a d d e b ts b e tw e e n 1974 a n d 1976 m a y be p a r tly a n a rtifa c t o f re d e s ig n o f th e q u e s tio n n a ire ; h o w e v e r, b o th ite m s re c e iv e s m a ll w e ig h ts (a c o m b in e d 2.7 % ) a n d th e o v e ra ll p ric e in d e x s h o u ld n o t be s ig n ific a n tly a ffe c te d b y th e p o s s ib le e x is te n c e o f s u c h erro r. Fees, costs, and dentists incomes W it h th e e s tim a te s fr o m th e p ric e in d e x fo r th e p e rio d fr o m 1 9 7 0 to 1 9 7 6, th e n a tu re o f th e c o s t-p ric e squeeze d u r in g th e E c o n o m ic S ta b iliz a tio n A c t c a n be e x a m in e d b y c o m p a rin g in p u t p ric e in cre a se s w it h fe e in cre a se s. T a b le 2 p re s e n ts e s tim a te s o f d e n tis ts fees as re p o rte d b y th e B u re a u o f L a b o r S ta tis tic s (a d ju s te d f o r a 1 9 7 0 b a s e ). T h e c o m p o n e n t p a rts o f th e fee in d e x, a m a lg a m re s to ra tio n s, e x tra c tio n s, a n d m a x illa r y d e n tu re s, are p re s e n te d w it h th e re s p e c tiv e re c o rd s. U s in g th e e s tim a te s o f n e t in c o m e s p re s e n te d in F ig u re 2 (a d ju s te d fo r in fla tio n ), th e g e n e ra l tr e n d a m o n g fees, costs, a n d d e n tis ts in c o m e s c a n b e c o m p a re d. D e n tis ts n e t in c o m e s a d ju s te d fo r in f la t io n are lo w e r in 1 9 7 6 th a n in th e 1 9 7 0 base p e r io d. T h e o v e r a ll fe e in d e x i n crease d a to ta l o f 4 4.2 % o v e r th e 1970 f ig u r e w h e r e a s i n p u t p r ic e s i n crease d 3 9.5 %. F ro m th e in d e x v a lu e s p re s e n te d in T a b le 2, a n n u a l rate s o f ch a n g e w e re c a lc u la te d to m o re c le a rly e x a m in e a n d id e n t if y th e p a tte rn s a n d e ffe c ts o f th e E c o n o m ic S ta b iliz a tio n A c t (T a b le 3). T h e fe e r e g u la tio n s s ta rte d A u g 15, 1 9 7 1, a n d e n d e d w h e n th e a c t e x p ire d o n A p r i l 30, 1 9 7 4. T h e c o m p o s ite fe e in d e x s h o w s th e e x p e c te d re s p o n s e to th e a c t w it h its decre a se in in f la t io n ra te in 1971 to 1972 a n d in 1972 to 1 9 7 3.T h e fig u re fo r 1973 to 1 9 7 4, 7.6 %, re g is te rs th e e n d o f g u id e lin e s a n d th e b e g in n in g o f th e c a tc h -u p p e rio d. T h e a verage a n n u a l r a t e o f in c r e a s e i n fe e s th ro u g h o u t th e p e rio d fr o m 1 9 7 0 to 1 9 7 6 is 6.3 %. A s in d ic a te d b y th e p ric e in d e x, p ric e s o f p ra c tic e in p u ts c o n tin u e d to in c re a s e th ro u g h o u t th e p e rio d fro m 1 9 7 0 to 1976. W it h th e im p o s itio n o f c o n tro ls in 1971, p ric e s o f in p u ts in crease d fa s te r th a n fees a n d re p re s e n te d a re v e rs e d tre n d in c o m p a ris o n w it h th e d e c o n tro lle d p e rio d s, 1 9 7 0 to 1971 a n d 1974 to 1976. T h e o v e ra ll p ric e s o f in p u ts in c re a s e d at a n a n n u a l ra te o f 5.7 % s lig h t ly less th a n th a t o f fees. C o n se q ue n ce s o f th e c o n tro ls are illu s tr a te d b y th e g ro w th in d e n tis ts in c o m e s. B e tw e e n 1 9 7 0 a n d 1 9 7 2, w h ic h w a s la r g e ly a n u n c o n tr o lle d p e rio d, d e n tis ts in c o m e s ( in c o n s ta n t d o lla rs ) in c re a s e d a t a n a n n u a l ra te o f 3.8 %. D u r in g th e te n u re o f th e Table 2 Price index o f practice costs, dentists fees, and dentists' incomes (constant dollars) from 1970 to 1976 (1970 = 100).* 1970 1971 1972 1973 1974 1975 1976 Price index of practice costs 100.0 104.7 110.1 115.7 124.5 139.5 Composite fee 100.0 106.4 110.8 114.2 122.9 136.6 144.2 Amalgam restoration 100.0 106.4 111.2 115.3 124.8 138.6 147.5 Extraction 100.0 107.0 111.5 114.2 123.1 135.7 144.6 Maxillary denture 100.0 105.6 109.3 112.1 118.5 129.3 137.2 Dentists incomes (constant dollars) 100.0 107.7 87.0 93.2 Survey of Dental Practice, 1975, 1977, American Dental Association; Survey of Current Business, US Department of Commerce. 8 6 0 J A D A, V o l. 9 9, N o v e m b e r 1 9 7 9
Table 3 Rates o f change in the price index o f practice costs, dentists fees, and dentists incomes (constant dollars) from 1970 to 1976.* 1970 to 1971 to 1972 to 1973 to 1974 to 1970 to 1971 1972 1973 1974 1976 1976 Price index of practice costs 4.7 5.2 5.1 7.6 5.9 5.7 Composite fee 6.4 4.2 3.1 7.6 8.3 6.3 Amalgam restoration 6.4 4.5 3.7 8.3 8.7 6.7 Extraction 7.0 4.2 2.4 7.8 8.4 6.3 Maxillary denture 5.6 3.5 2.6 6.0 7.4 5.4 1970 to 1972 1972 to 1974 Dentists incomes (constant dollars) 3.8-10.1 3.5-1.2 *Survey of Dental Practice, 1975, 1977, American Dental Association; Bureau of Labor Statistics. a ct, d e n tis ts in c o m e s d e cre a se d a t an a n n u a l ra te o f 1 0.1 %. D u r in g th e c a tc h -u p p e rio d fr o m 1 9 7 4 to 1976, in c o m e s in c re a s e d a t a 3.5 % a n n u a l ra te (a d ju s te d fo r in fla tio n ). O v e ra ll, d e n tis ts in c o m e s a c tu a lly decre a se d at a n a ve ra g e ra te o f 1.2% p e r y e a r th ro u g h o u t th e p e rio d fro m 1970 to 1976. D e n tis ts s ta n d a rd s o f liv in g, as m e a s u re d b y th e p u rc h a s in g p o w e r o f n e t in c o m e fr o m p ra c tic e, w a s s m a lle r in 1 9 7 6 th a n i t w a s in 1970, a n d w a s d u e, a t le a s t in p a rt, to th e i m p o s i t i o n o f fe e c o n t r o ls a n d g u id e lin e s. F ig u re 4 s u m m a riz e s th e p a tte rn s w it h a g ra p h ic a l re p re s e n ta tio n o f th e rate s o f in c re a s e in d e n tis ts in c o m e s a n d th e d iffe re n c e in th e rates o f in crease in d e n tis ts fees a n d p ric e s o f p ra c tic e in p u ts. In 1970 to 1971, fees in c re a s e d fa s te r th a n in p u t p ric e s, b u t th e p a tte rn re v e rs e d in 1971 to 1 9 7 2. D e n t is t s in c o m e s f o r th e p e rio d in c re a s e d b y 3.8 % a n n u a lly. C o n tro ls o n fees e x te n d e d th e co stp r ic e s q u e e z e th r o u g h th e p e r io d fro m 1973 to 1974 w h e n d e n tis ts i n c o m e s d e cre a se d 1 0.1 % a n n u a lly. B y 1976, th e tre n d re tu rn e d to n o rm a l a n d d e n tis ts in c o m e s c o n tin u e d to in c re a s e a t th e 3.5 % rate. T h e e ffe c t o f th e E c o n o m ic S ta b iliz a tio n A c t is cle a r. B e tw e e n 1972 a n d 1974, d e n tis ts s ta n d a rd s o f liv in g r a p id ly d e c lin e d. Summary JS u o CB3a c < Dentists mean net incomes *No figure available for the fee-cost difference for 1975. Fig 4 Annual rates of change in dentists mean net incomes (constant dollars) and net difference in fees and price index o f practice costs. (Sources: Survey o f Dental Practice, 1975, 1977, A m erican Dental Association; Bureau of Labor Statistics, US Department of Labor.) T h ro u g h o u t th e 2 0 -y e a r p e rio d fro m 1952 to 1 972, d e n tis ts n e t in c o m e s, a d ju s te d fo r in fla tio n, in c re a s e d a n d p ro v id e d g re a te r m o n e ta ry re w a rd s to th e p ra c tic e o f d e n tis try. E v id e n c e d is c lo s e s a c lo s e a s s o c ia tio n b e tw e e n th e p u rc h a s in g p o w e r o f d e n tis ts n e t in c o m e s a n d th e g e n e ra l le v e l o f econom ic activity (m easured by th e GNP in co n stan t dollars). D entists are not im m une to tem porary recessions. The p erio d from 1972 to 1974, w ith the im posed fee guidelines of N ixo n s E conom ic S tabilization A ct, was unusual. With effective fee g u id elin es d u rin g th e latter tw o p h a ses co u p led w ith freely fluctuating in p u t prices, d en tists w ere caught in a n incom e squeeze. D uring 1972 to 1974, th e p u rch asin g pow er of d en tis ts n et incom es fell at a rate of 10.1% per year as the price index of p ra c tic e co sts o u tp a c e d d e n t is ts fees. A fter th e Econom ic S tabilization A ct ex p ired in 1 9 7 4, tren d s retu rn ed to norm al. D entists n et incom es in c re a s e d a t ra te s c o n s is te n t w ith changes in th e GNP and d en tists fees in c re a se d s lig h tly faste r th a n th e P rice Index of Cost of C onducting a D ental P ractice. This article was prepared by Donald R. House, PhD, economic consultant to the ADA. J A D A, V o l. 99, N o v e m b e r 1 9 7 9 861