Appendix 6Parliamentary Budget Office Costings
Various policy options for reforming Commonwealth subsides of dental services
1.1Person/party requesting the costing: Select Committee into the Provision of and Access to Dental Services in Australia.
1.2Date costing completed: 3 November 2023.
1.3Expiry date of the costing: Release of the next economic and fiscal outlook report.
1.4Status at time of request: Submitted outside the caretaker period.
1.5Not confidential.
Summary of proposal
1.6Component 1: The proposal would expand Medicare Benefits Schedule (MBS) subsidies for dental services, with 4 options and 8 sub-options.
Option 1: Universal coverage of dental services
1.7Under this option, rebates at 100% of the schedule fees for all items specified in the Child Dental Benefits Schedule (CDBS) would be made available to all Medicare card holders, with 2 sub-options:
Option 1.1: The rebate for each eligible individual would be capped and indexed as per current CDBS arrangements. The capped amount is currently at $1,052 over 2 calendar years and is subject to indexation on 1January2024.
Option 1.2: The rebate would be uncapped.
Option 2: Means-tested coverage
1.8Under this option, rebates at 100% of the schedule fees for all items specified in the CDBS would be made available to health care card holders, pension card holders and those on government income support—consistent with current means test requirements for the CDBS—with 2 sub-options:
Option 2.1: The rebate for each eligible individual would be capped and indexed as per current CDBS arrangements. The capped amount is currently at $1,052 over 2 calendar years and is subject to indexation on 1January2024.
Option 2.2: The rebate would be uncapped.
Option 3: Seniors dental care
1.9Under this option, rebates at 100% of the schedule fees for all items specified in the CDBS would be made available to holders of Commonwealth seniors health cards, pensioner concession cards and health care cards who are 65 years or older.
Option 3.1: The rebate for each eligible individual would be capped and indexed as per current CDBS arrangements. The capped amount is currently at $1,052 over 2 calendar years and is subject to indexation on 1January2024.
Option 3.2: The rebate would be uncapped.
Option 4: Funding preventative care only
1.10Under this option, rebates at 100% of the schedule fees for all items under U0Diagnostic Services and U1 Preventative Services specified in the CDBS would be made available to all Medicare card holders, with 2 sub-options:
Option 4.1: The rebate for each eligible individual would be capped and indexed as per current CDBS arrangements. The capped amount is currently at $1,052 over 2 calendar years and is subject to indexation on 1January2024.
Option 4.2: The rebate would be uncapped.
Component 2: Education and promotion
1.11Funding would be provided to run a national education and promotion campaign to encourage better oral hygiene practices and provide information about eligibility for subsidised services.
Component 3: Chief Dental Officer
1.12Funding would be provided to establish an office of the Chief Dental Officer—a position that would be similar to the Chief Medical Officer and administered by the Department of Health and Aged Care.
1.13The request also sought estimates of additional funding to meet the current demand for public dental services.
Costing overview
1.14All options in the proposal would decrease the fiscal and underlying cash balances over the 2023–24 Budget forward estimates period (Table 1). This reflects an increase in both administered and departmental expenses.
1.15The underlying cash balance impacts differ from the fiscal balance impacts due to time lags between when services are delivered and subsidies are paid to health care providers.
1.16A breakdown of the financial implications (including separate public debt interest (PDI) tables) over the period to 2033–34 is provided at Attachment A.
1.17Each table includes the cost estimates for all 3 components in the total estimated cost of the policy option. That is, each table includes the expected impact of the expanded subsidy on dental services, education campaign and establishment of a Chief Dental Officer.
Figure 6.1Various policy options for reforming Commonwealth subsidies of dental services – Financial implications ($m) (including components 1 to 3)
(a) A positive number represents an increase in the relevant budget balance; a negative number represents a decrease. (b) PDI impacts are not included in the totals. (c) Figures in this table include financial implications from components 1 to 3 under each option. A breakdown of financial implications by component under each option is at Attachment A. - Indicates nil.
Uncertainties
1.18The financial implications of the proposal are highly uncertain and sensitive to assumptions about the eligible population, the utilisation rate and the type of dental services consumed under each policy option, as well as the supply-side response to the proposed policy change.
For example, the proposal may result in changes to products offered by private health insurers, which may have a flow-on impact to insurance rebates provided by the Commonwealth Government. This has not been factored into this costing due to the high degree of uncertainty associated with the potential flow-on effect.
It is also highly uncertain if there would be sufficient supply of qualified dental professionals to meet the increased demand for dental services under the proposal. Reflective of the supply constraints, this costing applies a gradual phase-in over 5 years to reach the assumed final or static state utilisation rate of 85%.
1.19The Parliamentary Budget Office (PBO) has not included in this costing the flow-on impact for the broader public health system from the proposal, as the impact is highly uncertain due to the complex interactions across the relevant sectors.
Unmet demand
1.20Current available data suggest there is unmet demand for public dental services. For example, the latest Australian Institute of Health and Welfare (AIHW) data shows that many Australians wait over a year to receive public dental care, with median wait times in 2021–22 ranging between 189days in South Australia and 1,281 days in Tasmania (see further discussion and Figure B8 in Attachment B).
1.21The additional funding required to meet the current demand for public dental services would be affected by multiple factors, including primarily the design of the policy intervention used. It would also be affected by policy interactions across sectors of the dental care system, noting that funding for public dental services is currently primarily the responsibility of states and territories. Analysis published by the AIHW suggests that the data on dental services provided by state and territory governments are patchy and inconsistent, making it difficult to reach a reliable set of estimates at the national level.
1.22On this basis, the PBO concludes that it is not possible to reliably quantify the additional funding required to meet the current unmet demand for public dental services.
Key assumptions
1.23The PBO has made the following assumptions in costing this proposal.
The supply of dental services would increase each year so that there would be sufficient qualified dental professionals available to meet the increased demand for services. This would allow the aggregate utilisation to reach 85% within 5 years of policy implementation.
The aggregate utilisation rate would increase from the 54% baseline utilisation rate in 2023–24 to around 65% in 2024–25, before increasing by around 4 percentage points each year to reach 85% in 5 years. It would remain at that level for the rest of the costing period (Figure 1). The increase in 2024–25 reflects an immediate increase in demand for dental services from people currently covered under private health insurance.
The assumed lack of full utilisation is consistent with domestic and international experience. That experience suggests that financial incentives alone are not likely to result in full utilisation in the presence of remaining, albeit lessened non-financial barriers, such as access constraints, differences in the perceived importance of dental care and concern related to dental visits. The assumption of an 85% utilisation rate is similar to the utilisation rate of 82% assumed in the Canadian Parliamentary Budget Office's 2020 Cost Estimate of a Federal Dental Care Program for Uninsured Canadians.
Figure 6.2The aggregate utilisation rate under the proposal
The utilisation rate for individuals who are currently eligible for the CDBS would remain at its average over the past few years, at around 35% throughout the costing period. Children not eligible for the CDBS are assumed to have similar utilisation rates to their parents.
The utilisation rate for adults with private health cover (comprising 52% of the eligible adult population) would increase from 70% in the baseline to reach long-term utilisation rates once the proposal is implemented.
The utilisation rate for adults without private health cover would rise from 43% in the baseline to reach long-term rates over 5 years.
The utilisation rate assumptions for non-CDBS cohorts are informed by the National Survey of Adult Oral Health 2017–18, which shows that of individuals aged 15 and above:
70% of those privately insured and 43% of those uninsured attended a dentist in the last 12 months.
26% of those privately insured and 52% of those uninsured reported they avoided or delayed dental care due to cost.
The service mix under the proposal would be consistent with current observations under the CDBS for those aged 2 to 17 years and the Veteran’s Dental Scheme (VDS) (excluding orthodontics) for those aged 18 years and over.
The average benefit per service in 2024–25 would be approximately $65 for minors and $96 for adults under options 1 and 2, $95 under option3and $53 under option 4, and would be indexed as per current Medicare indexation arrangements over the costing period.
The average benefit per service for minors (aged 2 to 17 years) was modelled based on the current CDBS expenditure.
The average benefit per service for age cohorts 18 years and above was based on the current VDS average benefit, with a 7.5% reduction to account for differences between the CDBS and VDS in schedule fees and the scope of service.
The average benefit per service for preventative services was based on the current CDBS average benefit for the relevant items (i.e., items under U0 Diagnostic Services and U1 Preventative Services).
Service volumes per capita for the uncapped options would be 22% to 42% higher compared to the corresponding capped options. These estimates were informed by the proportion of respondents to the National Survey of Adult Oral Health 2017–18, who reported that cost prevented specific recommended treatments. It should be noted that 1 dentist visit may result in more than 1 dental service being provided.
Under option 1.1 (capped universal dental) approximately 4.1 services would be utilised per capita per year.
Under option 1.2 (uncapped universal dental) approximately 5.5 services would be utilised per capita per year.
Under option 2.1 (capped means-tested dental) approximately 4.2services would be utilised per capita per year.
Under option 2.2 (uncapped means-tested dental) approximately 6.0services would be utilised per capita per year.
Under option 3.1 (capped seniors dental) approximately 4.5 services would be utilised per capita per year.
Under option 3.2 (uncapped seniors dental) approximately 5.4 services would be utilised per capita per year.
Under option 4.1 (capped preventative dental) approximately 2.3 services would be utilised per capita per year.
Under option 4.2 (uncapped preventative dental) approximately 3.1services would be utilised per capita per year.
The cost structure of the National education and promotion campaign would be consistent with previous campaigns run by the Department of Health and Aged Care. It would run over a period of 3 years (2024–25 to 2026–27) and would include advertisements on television, digital and social media. This would include additional advertisements on ethnic and First Nations media with a limited supply of printed materials by direct mail.
The cost structure for the Office of the Chief Dental Officer would be proportional to that for the Chief Medical Officer, given the similarity of the roles as specified by the requestor.
Any changes to funding contribution from states and territories as a result of this proposal would be met by the state and territory governments.
Methodology
Component 1 MBS expansion
1.24The administered costs were calculated by multiplying the average benefit per service by the estimated increase in service volume under each policy option.
The average benefit per service under each policy option was estimated as per Key assumptions.
The eligible population under options 1 and 4 was estimated using general population projections, excluding the projected number of temporary visa holders, both provided by Treasury.
The eligible population under options 2 and 3 was derived from current Department of Social Services welfare recipient numbers, which would grow in line with Treasury’s population projections over the costing period.
The service volume under the proposal was estimated by multiplying the estimated eligible population under each option by the assumed utilisation rate and the services per capita discussed in Key assumptions.
The increase in service volume was estimated by taking the difference between the service volume in the baseline and the service volume under the proposal.
1.25Ongoing departmental expenses for administering the program were calculated by multiplying the estimated increased services by the estimated unit cost for administering the affected service items provided by Services Australia.
1.26A one-off establishment cost of up to $50 million was included in the first year under each option for Services Australia and the Department of Health and Aged Care to implement the new dental scheme, consistent with experience from previous similar budget measures.
The establishment cost under each option is proportional to the size of the eligible cohort and would cover implementation costs including ICT upgrades and relevant compliance activities.
Component 2 Education and promotion
1.27Costs for this component were estimated based on costs for similar medium-sized education and promotional campaigns over 3 years and then grown by the consumer price index over time.
Component 3 Chief Dental Officer
1.28Costs for this component were modelled consistently with those for the Chief Medical Officer but at a lower scale, with underlying data and model provided by the Department of Health and Aged Care.
The costs of this component reflect staffing requirements of 11.2 FTE initially (1 APS4, 3 APS5, 3 APS6, 3 EL1, 1 EL2, and 0.2 SES1) and 12.2 FTE ongoing (1 APS4, 3 APS5, 3 APS6, 4 EL1, 1 EL2, and 0.2 SES1).
1.29Financial implications were rounded consistent with the PBO's rounding rules as outlined on the PBO Costings and budget information webpage.
Data sources
Australian Bureau of Statistics (2022)National Health Survey 2020-21, accessed 27 October 2023
Australian Dental Association (2019), The Australian Dental Health Plan, accessed 24 October 2023
Australian Institute of Health and Welfare (2023), Oral health and dental care in Australia, accessed 30 October 2023
Australian Institute of Health and Welfare (2023), Oral health and dental care in Australia, Data, accessed 27 October 2023
Australian Institute of Health and Welfare (2022), Public Dental Waiting Times, accessed 27 October 2023
Australian Research Centre for Population Oral Health (2019), National Study of Adult Oral Health 2017-18, accessed 27 October 2023
Department of Health and Aged Care (2023), Report on the Fifth Review of the Dental Benefits Act 2008, accessed 27 October 2023
Office of the Parliamentary Budget Officer (Canada) (2020), Cost Estimate of a Federal Dental Care Program for Uninsured Canadians, accessed 27 October 2023
Organisation for Economic Co-operation and Development (2021), Health at a Glance 2021 - Extent of health care coverage, accessed 27 October 2023
Royal Commission into Aged Care Quality and Safety (2021), Final report: care, dignity and respect – Volume 1: Summary and recommendations, accessed 27 October 2023
The Department of Health and Aged Care provided the following data:
CDBS data 2018 to 2023
Departmental resourcing impacts in relation to establishment of a Chief Dental Officer.
The Department of Social Services provided welfare recipients and payment type data as at June 2023.
The Department of Veterans’ Affairs provided the following data:
VDS Model and estimated costs for the VDS over the forward estimates
Historical VDS utilisation data 2018–19 to 2022–23.
The Department of the Treasury provided Australian demographic projections across the forward estimates and medium term.
The PBO would like to thank the Parliamentary Library for their timely, impartial and confidential input into this response.
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Please note: The PBO's attachments have not been provided in this appendix.
The full costings document, including the attachments, will be available on the PBO's website.