The Health Care Sector Needs Innovation, Not Regulation

While problems with the U.S. health care system persist, the recent failures of the Affordable Care Act (ACA) illustrate that greater government regulation cannot cure what ails the U.S. health care industry. Deregulation that empowers private sector health care innovation can.

In fact, private sector innovations, such as Dental Service Organizations (DSOs), are already exemplifying how deregulation that empowers patients and health care providers can effectively address the inefficiencies of our current health care system.

Starting with the ACA’s failures, in remarks President Obama made on June 22, 2010 in celebration of the ACA’s passage, he noted that the health care system “was no longer working for families who were seeing more and more of their incomes eaten by health costs”.[i] Thanks to the ACA, however, President Obama predicted that the reforms would “cut costs and make coverage more affordable for families and small businesses.”

Based on President Obama’s goal of greater access to health care, the ACA is a failure. As just one example, a November 2015 Gallup survey asked respondents whether “they or a family member have put off any sort of medical treatment in the past year because of the cost.” [ii] The results are astounding.

Prior to the passage of the ACA, this metric was moving in the wrong direction. Back in 2001, 19 percent of respondents to the Gallup survey said that they, or a family member, had put off medical treatment due to the cost. This percentage rose to 29 percent in 2009 – the year the Affordable Care Act was passed.

If the regulatory approach of the ACA were effective, it is reasonable to assume that since its passage fewer people would put off medical treatment due to the cost. Six years later, this has not been the case.

In 2015, 31 percent of respondents now say they or a family member has put off medical treatment due to the cost – down from the high of 33 percent in 2014. In other words, the Gallup surveys, when combined with data illustrating that individual’s deductibles are rising and their choices of providers are narrowing, indicate that ObamaCare has not addressed the health care system’s problems identified by President Obama.

Contrast these experiences with the positive results from private sector innovations in the dental health care sector. It is now widely understood that proper dental care is an important component of maintaining an overall healthy lifestyle – there is a growing consensus that access to regular dental services improves health outcomes, while lack of access to regular dental services leads to worse health outcomes.

In light of the importance of proper dental care, the barriers impeding lower-income families from obtaining quality dental care is a significant health care problem. For instance, a November 2015 report from the National Minority Quality Forum documented that there are 47 million Americans that are impacted by barriers to quality dental care.

A primary barrier facing so many lower income patients is a lack of access to dental services. Low Medicaid reimbursement rates, burdensome paperwork requirements, and long delays before a dentist receives his/her reimbursement makes serving Medicaid patients unprofitable for many dental practices. The predictable result, which has been documented by the Government Accountability Office (GAO), is the current shortage of dental services for low-income families.[iii]

However, as identified in the aforementioned National Minority Quality Forum report, Dental Service Organizations (DSOs) are a private sector innovation that is helping to address this accessibility problem.

Through increased scale, DSOs are lowering the cost of operating a dental practice. These efficiencies include lower operational costs (such as lower accounting costs) and lower capital costs (the ability to purchase equipment at better prices due to bulk purchases and greater negotiating power). Through specialization, DSOs can also create efficiencies in administration, which is particularly important when dealing with bureaucratic state Medicaid programs.

These efficiency gains empower DSOs to profitably serve the Medicaid population in contrast to traditional dental practices. Therefore, DSOs are a private sector innovation that, through improved efficiencies, improves the health outcomes for patients while simultaneously lowering health care costs.

Systemically, DSOs exemplify the types of improvements that the U.S. health care sector requires. Like DSOs, private sector innovations can address the deficiencies plaguing the current health care system and expand the availability of higher quality, lower health care costs. Health care deregulation that empowers patients and medical professionals is the best way to replicate the DSO success story to the broader healthcare market.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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