Abstract
This study evaluates whether transitioning Australia's dental care system from predominantly private to a mixed private-public (MPP) model under Medicare provision would improve market access, reduce affordability barriers, and lead to increased welfare. We use a unique methodological framework combining incentivised experimental economics with agent-based matching simulation to enable ex-ante policy evaluation.
We conducted a two-stage incentivised online experiment with 1,429 Australian participants. Consumer and dentist choices were analysed using mixed-multinomial logit and latent class models to capture preference heterogeneity. We estimated the willingness-to-pay (consumers) and willingness-to-accept (dentists) using panel regressions controlling for potential selection endogeneity. Using the experimentally derived preferences we parameterized heterogeneous agents for both sides of the market in a matching simulation, modelling and comparing pre- and post-policy market outcomes.
Simulation results demonstrate that the transition to the MPP market would increase access to care by at least 15.31%, ranging up to 79.95% (p < 0.001), reduce affordability barriers by 68.35% (p < 0.001), and significantly increase fee-free service provision. Whilst the simulation results indicate a reduction in quality of 6.05%, the utility of both consumers and dentists is higher in the MPP market.
Findings demonstrate positive overall welfare gains from MPP transition despite quality reductions and geographical implementation complexity. However, preference heterogeneity necessitates targeted rather than uniform policies, with particular attention to rebate-sensitive providers and vulnerable populations. This integrated experimental-simulation approach represents a methodological innovation enabling evaluation of unobservable market transitions while accounting for dual-sided behavioral responses, offering a replicable framework for policy research.