Bipartisan protectionism rears its ugly head in the states

The class warfare rhetoric coming from the White House and Senate Majority Leader Harry Reid has found a receptive audience with an American people who increasingly view the political and economic system as rigged. And it's not hard to see why.

Present-day officeholders, both Republican and Democrat alike, continue to propose and implement policies that move toward a bigger, more activist government where politicians pick winners and losers in the economy, with the winners being political cronies and those who can afford well-heeled lobbyists, while the losers are the general public and entrepreneurs.

It's not just politicians in Washington, DC, who are susceptible to efforts by some businesses to use the legislative process and power of government to kneecap competition. Not only is such rent-seeking rampant in state capitals across the country; it's a bipartisan affair.

Consider Texas, a state widely perceived to be a bastion of conservative ideals and free market policies. Even in this relatively well-governed state, legislation that would lead to the imposition of new fees and burdensome regulations designed to reduce competition in the dental industry was seriously considered by lawmakers in the last session of the state Legislature.

This came on the heels of a similar effort in North Carolina in 2012 to outlaw certain dental companies at the behest of dentists who would prefer to not have to deal with competition. Simply put, these bills, which got serious traction in Republican-controlled states, represent the classic protectionist case of businesses seeking to use the power of the state to put their competitors out of business.

In Texas and North Carolina, the targets of these protectionist bills were dentists that utilize dental service organizations (DSOs). Today, thousands of dentists contract with DSOs for nonclinical administrative support services, such as facilities maintenance, supplies procurement (with purchasing power that reduces costs), paperwork, and the like. These services enable dentists to reduce operating costs of their practices and devote more time to caring for patients. Contracting with DSOs also allows many dentists to invest in the modern technology that improves the quality and safety of dental care. It's a business model that makes sense for consumers and caregivers.

Yet, as we have seen recently, some otherwise free market-oriented state lawmakers are considering protectionist bills to shut down innovative dental practices simply because other dentists in their districts don't like having to compete for customers.

The business model that these protectionist measures seek to shut down isn't new -- in fact, it's been around for decades and used by other health professionals such as doctors, oncologists, and optometrists. It's a model that has done a lot of good for dentists and patients. A study by former Reagan administration economist Arthur Laffer found that dentists who use DSO support services charge lower rates than other dentists do. There is a lot of talk in DC about how to bend the healthcare cost curve. DSOs show how to do it in practice.

Even the Obama administration can't deny the value that DSOs provide to dentists and their patients. Federal Trade Commission officials have spelled this out in writing, warning that "Restrictions on the ability of dentists to run their practices by contracting out the management functions provided by DSOs may reduce competition and consumer choice by preventing the emergence and expansion of new, more efficient forms of professional practice."

In short, DSO-supported dentists reduce costs and increase access to, and improve the quality of, care. DSO-supported dentists also demonstrate the beauty of the free market and why it works. After all, why does one need or want their dentist distracted by administrative duties such as bookkeeping and property management, when the dentist could contract that out to those who have a comparative advantage in that function so that dentists have more time to focus on patient care? The DSO model has proved to be a win-win-win for dentists, patients, and taxpayers alike -- just like medical support organizations, which have successfully supported doctors across the country for decades.

Former President Calvin Coolidge said, "It is much more important to kill bad bills than to pass good ones." Bad bills to shut down DSO-supported dentists do not have the public's best interest at heart and were rightfully killed in North Carolina and Texas. However, expect these same protectionist measures to pop back up in state legislatures in coming months and years.

Patrick Gleason is the director of state affairs for Americans for Tax Reform (ATR).

This column first ran on Forbes.com. DrBicuspid.com wishes to thank ATR for its kind permission to reprint.

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