Capitalism is good. Entrepreneurs hire workers, workers provide services, consumers create profits -- all leading to more services, employees and entrepreneurs. According to one of America's leading economists, capitalism is even good for children's teeth. You'd think everyone would be happy with this, but, of course, they're not.
Traditional dentistry and Medicaid habitually underserve low-income children, leading to untreated cavities and costly, painful ER visits. Poor children without dental care can suffer long-term health issues and even death.
Due to abysmal Medicaid reimbursement rates and disincentives to set up practices in inner cities or rural areas, only 20 percent of dentists accept Medicaid, and 17 million poor children go untreated every year. Enter Dental Service Organizations, or DSOs -- a new model for dental practice. DSOs perform the business requirements of a practice, leaving dentists free to perform dentistry. The model has attracted investment dollars, some from private equity.
Using economies of scale and leveraging business efficiencies, DSOs overcome constraints on traditional dentistry. Many operate in inner cities and rural areas, some specifically designed to serve Medicaid children. Since DSOs appeared in the 1990s, the number of poor kids seeing a dentist regularly has doubled.
Unfortunately, DSOs' private-sector solutions make them villains for liberals. There have been a few bad actors that rightfully suffered swift retribution by regulators and courts -- but not before the trial bar caught wind of a potential new cash cow.
PBS and the anti-capitalist Center for Public Integrity -- a nonprofit journalism group funded by George Soros -- declared war on DSOs and, by extension, on poor children's teeth. The CPI and PBS' "Frontline" aired a baseless hit piece on DSOs in June, claiming that the organizations "overtreat" patients. The CPI's David Heath gave a follow-up interview, speaking derisively of private equity and vaguely noting he found "one example" of his allegations. Heath acknowledges traditional dentistry fails the poor but seems to think private investment is worse.
The CPI/"Frontline" story was a bit shaky. Its primary witness was a convicted felon terminated from a DSO for falsifying documents. And Dr. Arthur Laffer, the famous economist, challenged the accusations. He started by asking Heath for the data used in the "Frontline" report so that he could recreate the calculations. Heath refused.
So Laffer conducted an audit based on Texas state-provided Medicaid data for 2011. The analysis that resulted is devastating to CPI claims against DSOs, proving the exact opposite of what the CPI was claiming and PBS was reporting. He found that DSOs performed 10 procedures per patient, and traditional dentists performed 12. Kool Smiles, the DSO that PBS savaged, performed only eight. As for X-rays, the yearly per-patient cost was $48.60 for DSOs and $51.20 for non-DSOs. DSO dentists performed 40 percent fewer extractions than traditional dentists and 16 percent fewer crowns.
There is a history of left-leaning consumer "advocates" and media assailing industries just before trial lawyers swoop in with meritless class action lawsuits. DSOs make money, and it's easy to find "victims" in fragile economic populations. The trial bar is now trolling the Internet for customers. As poor children suffer from painful holes in their teeth, the American public is exposed to gaping holes in honesty.
It will be a tragedy if low-income families shy away from DSOs because of falsehoods circulated by so-called nonprofit journalists unable or unwilling to defend their accusations.
Kerri Toloczko is a senior policy fellow at Let Freedom Ring, a public policy organization supporting constitutional government, economic freedom and traditional values.