A Private Sector Healthcare Solution That We Can Smile About

Earlier this year, Illinois Gov. Pat Quinn decided to cut $1.6 billion from the state’s Medicaid program to help get the state’s finances under control. Among the benefits slashed was dental coverage for adults.

The Land of Lincoln was only the latest cash-strapped state to scrap dental coverage under Medicaid, joining the likes of Pennsylvania, Massachusetts, California, and Washington.

States must do something to prevent Medicaid from taking over their budgets entirely. But these cuts in dental benefits may only deliver temporary fiscal relief — and end up costing states more in the long run.

Fortunately, there’s a way out of this conundrum. It’s called a “dental service organization” (DSO). The Pacific Research Institute just released a study by Wayne Winegarden and Donna Arduin entitled “The Benefits Created by Dental Service Organizations” that illustrates how DSOs are leveraging the power of market competition to deliver dental benefits cost-effectively now — with an eye on avoiding even more expensive dental and medical procedures later.

In most states, low-income Americans have little to no access to dental care. Only about half of state Medicaid programs cover anything beyond treatment of dental pain and emergency room visits for their poor.

In states where Medicaid does cover trips to the dentist, many beneficiaries can’t find a doctor who will see them, thanks to the program’s absurdly low reimbursement rates.

According to a Pew Research Center study, Medicaid pays dentists around 60 cents on the dollar in 26 states. Just one state paid dentists 100 percent of their normal fees, while 14 paid less than half.

As a result, only a third of dentists will treat Medicaid patients. A Government Accountability Office (GAO) report found that in many states, most dentists “treat few or no Medicaid patients.”

So the poor don’t get many check-ups. According to the Agency for Healthcare Research and Quality, only one-third of poor children saw a dentist in 2008. In contrast, nearly two-thirds of those from high-income families did so. A Pew Center study found that one in five poor children — 17 million in total — go without dental care each year.

This has serious long-term consequences. The GAO found that one in three children had untreated tooth decay — twice the rate of those covered by private insurance — and one in nine had untreated decay in three or more teeth.

“Dental disease remains a significant problem for children aged 2 through 18 in Medicaid,” it concluded.

The Pew study notes that “a ‘simple cavity’ can escalate through their childhoods and well into their adult lives, from missing significant numbers of school days to risk of serious health problems and difficulty finding a job.”

And it’s these significant health problems that can quickly erase any savings a state thinks it generates by eliminating dental coverage under Medicaid.

As the Children’s Dental Health Project explains, when the poor go without routine dental care, they often end up in emergency rooms. A three-year comparison found that treating dental problems in emergency rooms cost 10 times more than preventive treatment provided in a dentist’s office.

States could simply pay dentists more. One study found that dentists’ participation increased by at least a third, and sometimes more than doubled, in states that boosted Medicaid payments.

But the reality is that they can’t afford to do so — as their strained budgets have caused them to cut dental coverage in the first place.

Enter the dental service organization. Starting in the late 1990s, dentists began banding together under DSOs, taking advantage of economies of scale in order to cut overhead costs and provide quality service at much lower prices. The DSO handles marketing, human resource support, accounting and billing, spreading costs efficiently across several practices.

Today there are more than 3,500 DSOs in operation, according to the Dental Group Practice Association. And according to a 2012 study by Laffer Associates, the cost per patient among DSOs operating in Texas was almost half that of traditional dental offices — $484, versus $712. At one DSO, Kool Smiles, the per-patient cost was just $345.

Because DSOs can operate more efficiently than a single dentist office, they can cope with Medicaid’s low reimbursement rates and heavy paperwork requirements, providing care for the poor without losing money on each patient they see.

And they’re starting to make an impact. The Children’s Dental Health Project has found that over the past decade, the share of poor children who’ve seen a dentist has climbed, and it attributed 20 percent of that increase to the expansion of DSOs.

DSOs stand out as an excellent example of private-sector innovation that can help solve a serious public health problem — while saving taxpayers money.

That’s something to smile about.