Latest / Stagflation Conversations with Fexingo: High Inflation, Slow Growth, and 1970s Echoes / How Stagflation Is Reshaping the Dental Care Industry
Transcript
- Lucas: So the June CPI came in at 3.5 percent annualized — a bit below expectations, and energy prices finally eased. But underneath that headline, there's a slow-motion shift happening in healthcare spending that doesn't make the front page. I'm talking about dental care. Luna: Dental care. That's interesting — because it's not the kind of thing you'd associate with 'discretionary' at first, but a lot of dentistry is elective. Lucas: Exactly. The American Dental Association's Health Policy Institute tracks utilization data, and their latest report shows dental visits per capita dropped five point seven percent between 2023 and 2025. That's not a pandemic hangover — that's a structural demand shift under stagflation. Luna: Five point seven percent — that's huge. What procedures are getting deferred? Lucas: Crowns, bridges, implants, even routine cleanings for adults without insurance. The ADA also found that the share of adults who skipped a recommended dental treatment due to cost rose from twelve percent in 2022 to sixteen percent in 2025. Meanwhile, the unemployment rate is at 4.2 percent — low by historical standards — but real wage growth hasn't kept pace with dental fee inflation. Luna: So patients are making a rational choice: 'I'll put off that root canal until next year.' But that has real consequences for dentists — their fixed costs don't go away. Lucas: Right. And that's where the response gets interesting. A growing number of independent dental practices are launching in-house membership plans — no insurance middleman. For a monthly fee, typically fifty to a hundred dollars, you get two cleanings, exams, and a discount on other procedures. Luna: I've seen those. Some of them are called 'Dental Savings Plans' or 'Practice Smile Clubs.' Lucas: Exactly. The ADA estimates that roughly twelve percent of independent practice revenue now comes from these subscription models — up from about four percent in 2020. And it's accelerating because patients crave predictability. When you're worried about inflation and a slow-growth economy, a fixed monthly fee feels safer than a surprise five-hundred-dollar bill. Luna: It's almost like the dental industry is becoming a bit like the gym model. You're paying for access, not for each visit. Lucas: Close, but with a twist. Most gym memberships rely on low utilization — people don't show up. Dental membership plans rely on high utilization to keep patients healthy so the practice doesn't get hit with expensive restorative work later. The incentive alignment is actually better for the patient. Luna: That's really interesting. And I guess it's working because it cuts out the administrative overhead of dealing with insurance companies. Lucas: Right. A 2024 study in the Journal of the American Dental Association found that practices with membership plans reported thirty percent lower administrative costs per patient. And they saw a twenty-two percent increase in recall visits — patients actually coming back for their six-month cleanings. Luna: So in a stagflation environment, both sides win. Patients get predictable costs, dentists get reliable cash flow and lower overhead. But is there a downside? Lucas: The main downside is that these plans typically don't cover major work — implants, oral surgery, orthodontics. So if you have a serious problem, you're still looking at a big bill. And lower-income patients who can't afford the monthly fee are left out entirely. The plans are really aimed at the middle-class insured who are tired of copays and deductibles. Luna: So it's a segmentation play. The industry is splitting into two tiers: the subscription model for the relatively secure, and the fee for service or Medicaid model for everyone else. Lucas: That's the frame. And it maps onto the broader economy — we've seen this in fast food, in pet care, in vacation rentals. Stagflation accelerates the unbundling of services. People want a flat rate, they want to know what they're paying, and they're willing to trade some flexibility for certainty. Luna: You know, we talk about these shifts every day on the show, and it's one reason I think this podcast has found an audience. We're trying to make sense of how people actually live through this economy. Lucas: Yeah. And honestly, if walking through the economy with us has made something click for you today, the smallest way to keep this ad-free and independent is to throw a coffee our way. That link is buy me a coffee dot com slash fexingo. Luna: It's a tiny thing, but it really does help us keep digging into corners like dental care that don't get the attention they deserve. Lucas: Exactly. So back to that subscription model — one specific practice I looked at, a five-dentist group in Columbus, Ohio, started their plan in early 2024. By June of this year, they had enrolled over two thousand patients. That's about seven hundred thousand dollars in annual recurring revenue for them. Luna: And that's just one practice. Are we seeing similar growth in other regions? Lucas: The ADA's data shows the highest adoption in the Midwest and South — areas where insurance coverage rates are lower and out-of-pocket costs have risen faster. The Northeast and West Coast have been slower, partly because managed care is more entrenched. Luna: So it's a regional story too. And the demographic that's signing up — is it mostly families? Lucas: Primarily families with children, and retirees on fixed incomes. Both groups are highly price-sensitive and value predictability. The ADA survey found that sixty-three percent of plan enrollees cited 'budget certainty' as their top reason. Luna: That makes sense. If you're retired and living on Social Security plus a small pension, a surprise dental bill can really throw off your month. Lucas: Absolutely. And that's the thing — stagflation doesn't hit everyone equally. The CPI might be 3.5 percent, but dental fees have been rising at about six percent annually for the last three years. So the real cost of dental care is growing faster than headline inflation. Luna: Which is why the subscription model is a rational response. It's capping that exposure. Lucas: Right. And I think we'll see this spread to other healthcare verticals. Ophthalmology, dermatology, physical therapy — any field where there's a recurring preventive component and a high out-of-pocket cost. Luna: So the takeaway for today: dental care is being reshaped by stagflation into a subscription model, and that's happening faster than most people realize. Lucas: Exactly. The numbers tell the story: five point seven percent fewer visits per capita since 2023. Twelve percent of practice revenue now from plans. Twenty-two percent increase in recall visits for practices that adopt them. It's not a fad — it's an adaptation. Luna: And one that might actually improve outcomes, at least for people who can afford the monthly fee. Lucas: That's the open question. As the gap widens, the policy conversation about dental coverage in Medicare and Medicaid becomes more urgent. But that's a topic for another episode.