Laffer: Bridging the dental divide for Texas children on Medicaid


Back in 2012, I delved into a topic of utmost importance and surprising depth: children’s dental health. For years, many dentists chose not to treat Medicaid patients. From an economic point of view, it was really no surprise; providers willing to treat the state’s most vulnerable patients faced prohibitively low reimbursement rates, while also being asked to bear prohibitively high administrative costs. As a result, many low-income children simply didn’t receive the dental care they needed.

Given the lifelong health consequences of poor dental health — as well as the rising costs associated with expensive emergency room visits for untreated tooth decay – Texas decided to act in 2007, raising Medicaid reimbursement rates in order to incentivize dentists to serve Medicaid patients. While many dentists continued to avoid low-income populations, something incredible took hold. That is, American entrepreneurs provided a free-market solution to a public health problem.

Specifically, dental practices supported by Dental Service Organizations (DSOs) began opening their doors to Medicaid patients. They were able to do so because DSOs tapped into economies of scale and centralized the nonclinical, administrative aspects of running a dental practice. This made it possible for DSO-affiliated dentists to focus exclusively on treating patients, saving them time and money. Higher reimbursement rates coupled with lower administrative costs provided by DSO affiliation allowed more dental practices to serve traditionally overlooked, low-income patients.

For the omniscient observer, the DSO model appeared to be working — providing kids with dental services and stemming the tide of dangerous tooth decay, all in a cost-effective and responsible way. Yet, despite the patient benefits and expanded access to care, DSOs drew unrelenting attacks.

Critics claimed that profit motives would lead to overutilization, that DSO-affiliated dentists would perform unnecessary services in order to maximize government reimbursement. These claims were the impetus for my analysis of Texas Medicaid data three years ago, and they proved to be almost entirely false.

In my study, I analyzed every single Medicaid claim paid for by the state of Texas in FY 2011, specifically focusing on Kool Smiles, the nation’s largest DSO serving children on Medicaid. I found that the dentists affiliated with Kool Smiles performed 8.24 procedures per patient, versus 12.39 procedures per patient at non-DSOs. Moreover, the cost per patient per year was $345.45 at Kool Smiles offices and $483.89 at other DSO-supported clinics in the state, compared with $711.54 for non-DSO dental offices.

Put simply, DSO-supported clinics performed fewer services than non-DSO clinics, and they provided these services at significantly lower cost. These findings were significant not only for patients, but also taxpayers on the hook for government bills.

Fast forward to 2016, and much of dental community has yet to fully embrace DSOs. However, new research continues to reinforce the clear upsides of this innovative care delivery model.

According to a new study by Dobson DaVanzo Associates – which provides an in-depth comparison of Kool Smiles utilization and Medicaid expenditures across seven states, including Texas – the DSO model continues to be incredibly successful in providing care to Medicaid patient populations at lower costs. Overall, Kool Smiles performed 25 percent fewer procedures per patient per year than other Medicaid providers in Texas, resulting in 37 percent lower Medicaid expenditures per patient per month. Indeed, average monthly per-patient Medicaid expenditures among Texas Kool Smiles providers averaged $12.27, compared to $19.34 for all other Medicaid dental providers.

Taking the data analysis a step further, Dobson DaVanzo calculated that if all Medicaid dental providers in Texas were to apply Kool Smiles’ protocols and utilization rates, the savings to the state would be more than $235 million annually. Not only does the DSO model appear to be working in Texas, but the evidence warrants that the DSO model be encouraged on an even larger scale. Dobson DaVanzo estimates that if all Medicaid dental providers in the seven states for which analysis was conducted were to apply Kool Smiles protocols and utilization rates, Medicaid savings to the states would total over $556 million per year.

Goodness knows that those perpetrating fraud against government services for the poor need to be brought to justice, but just about all the data indicate no evidence of overutilization of services by DSO-supported Medicaid dentists. In fact, the data show just the opposite. Study after study of Medicaid claim data serve to confirm what was apparent four years ago: DSO’s succeed in providing cost-effective care to a patient population desperately in need of dental services. While change isn’t always easy, especially in something as firmly rooted as health care, we need to move beyond the status quo. Now, more than ever, policymakers across the country must fully embrace a free market model that encourages efficiency and benefits patients and taxpayers in the process.

Laffer is an economist and former member of President Reagan’s Economic Policy Advisory Board. He also advised Prime Minister Margaret Thatcher on fiscal policy in the U.K. during the 1980s.


Reader Comments ...


Next Up in Opinion

Herman: Austin pioneers resting in peace in ABIA flight path
Herman: Austin pioneers resting in peace in ABIA flight path

Welcome to the latest installment of “What Is That?” Today we’re off to a cemetery in a highway interchange. So that’s kind of different. Today’s inquiry comes from Austinite Sherry Statman who thinks she’s come across bodies buried near the Austin-Bergstrom International Airport. Maybe you’ve seen them...
Daniel Silva, Neil deGrasse Tyson top best-sellers lists
Daniel Silva, Neil deGrasse Tyson top best-sellers lists

NEW YORK TIMES BEST-SELLERS FICTION 1. ‘House of Spies,’ Daniel Silva 2. ‘Camino Island,’ John Grisham 3. ‘Murder Games,’ James Patterson and Howard Roughan 4. ‘Into the Water,’ Paula Hawkins 5. ‘Use of Force,’ Brad Thor 6. ‘The Identicals,’ Elin Hilderbrand 7. ‘The Duchess...
Commentary: Pursuit of health care reform shouldn’t be Sisyphean
Commentary: Pursuit of health care reform shouldn’t be Sisyphean

In Greek mythology, Sisyphus was condemned to ceaselessly roll a giant stone to the summit, only for it to roll back down. In trying to fix health care, we Americans are like Sisyphus — and it’s a little painful to witness the strenuous futility. First, let’s look back to see how our health care system evolved. Every U.S. president...
Letters to the editor: July 23, 2017
Letters to the editor: July 23, 2017

Re: July 16 article, “UT officials confirm mumps on campus, 7 diagnosed this week.” There has been yet another outbreak of a preventable contagious disease, this time mumps at the University of Texas. The increasing number and severity of these outbreaks have been predicted by the medical community due to the increasing proportion of young...
Facebook comments: July 23, 2017

As reported by the American-Statesman’s Lilly Rockwell, IBM’s Diane Gherson said the technology company would reconsider its commitment to Texas if the so-called “bathroom bill,” which would regulate which restrooms transgender people can use, passes in the Texas Legislature. IBM has taken out full-page ads in Texas newspapers...
More Stories