Occupational Licensing

Tired of High Health Care Costs? Look at Misbehaving Dentists and the Licenses That Enable Them

Dentists use political muscle and control of regulatory boards to limit competition. How many other licensed professionals do the same?


With memories of a certain scene from Marathon Man fading, it's likely that most Americans have a pretty positive view of dentists. They keep our choppers in decent working order despite a wide range of neglect and abuse of the pearly whites. But there is a darker side of the profession, which has developed a reputation for playing hardball in protecting its licensed practitioners from potential competition. It's an object lesson in the dangers of occupational licensing—a demonstration that letting any industry coopt the coercive power of government does little to help consumers, while protecting the paychecks and prerogatives of the licensed few.

"Lawmakers from Maine to Alaska see a different side of dentists and their lobby, the American Dental Association, describing a political force so unified, so relentless and so thoroughly woven into American communities that its clout rivals that of the gun lobby," the Washington Post reported earlier this month.

You know reporters are troubled by bad behavior when they compare it to "the gun lobby"—culturally parochial modern journalists' equivalent of invoking the devil. But what they report is truly troubling. The Post adds, "Critics say the ADA has worked to scuttle competition that could improve access to dental care in underserved areas and make routine checkups and fillings more affordable."

The article goes on to detail efforts by organized dentists to intimidate lawmakers who consider allowing competition by dental therapists—non-dentist practitioners who can offer basic dental care at lower cost than dentists. It also discusses battles waged by the Federal Trade Commission against state dental boards—regulatory bodies run, as is the case with most licensing bodies, by and for the benefit of existing practitioners in the industry they oversee.

"The Federal Trade Commission today announced a consent order settling charges brought in September 2003 that the South Carolina State Board of Dentistry unlawfully restrained competition in violation of Section 5 of the FTC Act by adopting a rule that required a dentist to examine every child before a dental hygienist could provide preventive care—such as cleanings—in schools," the FTC announced in 2007.

"Today, the Supreme Court affirmed the Federal Trade Commission's position in recognizing that a state may not give private market participants unsupervised authority to suppress competition even if they act through a formally designated 'state agency'," the FTC reported in 2015. Yes, the scare quotes around "state agency" are original to the FTC press release—perhaps an acknowledgment by a federal regulatory body of the regulatory capture of the state body by the people it regulates, and its operation on their behalf (whether there's an implied lesson in there about all regulatory bodies I leave to readers' imaginations).

So it's clear that dental licensing bodies function to protect dentists from competition, to the point that they've even had their hands slapped by the U.S. Supreme Court for their behavior. Is there any counter-balancing benefit to be had from licensing dentists?

Not really, was the conclusion of a study performed by Morris M. Kleiner and Robert T. Kudrle, of the University of Minnesota and published in 1997. They compared regulatory regimes across the United States, from highly restrictive to permissive, and concluded that "increased licensing restrictiveness did not improve dental health, but did raise the prices of basic dental services."

There's a lesson in here about creeping regulation over time, since "a state that changed from a low level of restrictiveness to one that was in the most restrictive grouping could expect to see an increase in the price of dental services of 14 to 16 percent."

Those raised prices resulted not just in less accessible care, but also in a roughly 10 percent income boost for dentists in more highly regulated states. That means dentists have a built-in incentive to seek tighter regulation, resulting in stiffer prices.

That matters at a time when the cost of dentistry is rising far faster than inflation.

"The overall cost of all goods and services has approximately doubled" since 1984, the journal Dental Economics noted in 2015. "the cost of medical services has risen more than twice as rapidly as the overall rate of increase (212 percent). Unfortunately, the cost of dental services has risen even more steeply. Since 1985, there has been a 279 percent increase in the cost of dental services."

So, the research suggests that licensing dentists—trained medical professionals—does not improve the quality of dentistry, but does limit competition and raise prices. This isn't a surprising conclusion overall; study after study tells us that occupational licensing chokes off competition, reduces worker mobility, raises prices, and enriches a select few.

"The burden of occupational licensing is stifling entrepreneurship in America," the Goldwater Institute warned in 2015.

"Today nearly one-quarter of all U.S. workers need a government license to do their jobs," the White House cautioned in 2016. "The prevalence of occupational licensing has risen from less than 5 percent in the early 1950s with the majority of the growth coming from an increase in the number of professions that require a license rather than composition in the workforce."

"Lower wages and higher unemployment rates for unlicensed workers, as well as reduced migration rates for those with licenses, all suggest that the social costs of licensing are larger than many have previously believed," the Brookings Institution reported last year.

But the militant—and largely successful—efforts of dentists to limit competition and protect their incomes links occupational licensing to yet another concern of modern Americans—the cost of health care. Red tape doesn't just make it harder to start a business, or make a home repair more expensive—it contributes to the high and rising cost of medicine in the United States.

And it's not just dentists protecting their turf through the regulatory apparatus.

"Increasing the restrictiveness of optometrists' licensing examinations had a positive and statistically significant impact on the price of the eye examination and eyeglasses but had a statistically insignificant impact on the quality of the eye examination," wrote Deborah Haas-Wilson, a professor of economics at Smith College.

"By and large, optician licensing appears to be reducing consumer welfare by raising the earnings of opticians without enhancing the quality of services delivered to consumers," Edward J. Timmins of Saint Francis University and Anna Mills of the Mercatus Center found when they addressed the topic in 2015.

Is there any reason to doubt that physician resistance to nurse practitioners and other providers also raises costs with little or any improvement to quality of care? Or that the licensing of physicians themselves limits choices and contributes to the high cost of modern medicine?

Part of the solution would seem to be to ease the way for competition. More competitors can increase availability of services and reduce costs.

"An extensive review of the literature documenting care provided by dental therapists and clinical outcomes worldwide indicates that they offer safe, effective dental care to children," a report from the W.K. Kellogg Foundation says of the alternative providers so vigorously opposed by many organized dentists.

"We encourage the Ohio legislature to consider expanding general supervision of dental hygienists and licensure of dental therapists, and to avoid limiting general supervision and dental therapy practice," the FTC wrote to Ohio lawmakers in March, giving its own thumbs-up to at least some expanded competition.

But why another licensed profession that will, in turn, inevitably seek to protect its own prerogatives and limit competition through its special legal status? As we've already seen, licensing dentists and other medical practitioners seems to raise costs without improving quality. Licensing more practitioners helps to expand competition and availability, but doesn't actually address the fundamental problem of licensing itself. Admittedly, not everybody is ready for a world without the (dubious) protection offered by some sort of official endorsement of various practitioners' specialized skills. But that doesn't mean we're stuck with state-enforced red tape.

"There are a number of possible solutions to the problem of asymmetric information," the Brookings Institution report acknowledges in a discussion of possibilities ranging from voluntary options to coercive approaches of the sort that created the current occupational licensing morass. "Some are purely private: third party organizations with relevant expertise can attest to the competence of a worker, often through a private certificate or reputational markets like Yelp can help consumers share their experiences with particular workers."

Even some government officials agree.

"In cases where licensing is not strictly necessary, certification, registration, and bonding are often a better alternative," the United States Department of the Treasury says in a report on occupational licensing reform. "For example, private- or state-issued certificates can help consumers make well-informed decisions by identifying professionals with different degrees of experience and training."

Certified workers are more likely to move to where their skills are needed, Brookings mentions. That's because certifications are usually portable across jurisdictional lines, while licenses are not.

It's too early to know what specific solutions will evolve to fix the mess we've created with occupational licensing. But the over-the-top intimidation tactics of the ADA and its shiny-toothed shock troops have done the cause of reform a favor by reminding us that there's more to fear than faint memories of a scene from Marathon Man when we visit the dentist.