Hawaii’s Tax on Medical Services Harms Healthcare; It’s Time To Do Something About It!
by Keli‘i Akina
Hawaii has been suffering from a doctor shortage for years. Right now, experts estimate we have an unmet need of 776 full-time equivalent physicians.
The greatest need is in primary care, but some specialties are shockingly underrepresented.
For example, we have only about a quarter of the number of pediatric pulmonologists that a population of our size is expected to have — which speaks to the issue of “suffering.”
Imagine being a parent of a sick child. It’s stressful, and your sole focus is getting medical care for your child. To make matters worse, you live on a neighbor island and your child needs to see a pediatric pulmonologist, the specialty with the greatest scarcity in the state.
You’re prepared to fly to Oahu for treatment, but you don’t know how long you might have to wait. You start to wonder whether you might need to go to the mainland to get your child that desperately needed medical care.
Under the circumstances, you might start to wonder why Hawaii doesn’t have enough doctors. Sure, the islands are remote, but we care about health. In fact, we had medical insurance mandates long before they were popular.
Plus, this is paradise. Medical professionals like to come to Hawaii for conferences; why don’t more of them stay to set up a practice?
There is no simple answer to these quesitons. Factors such as burnout and retirement play a role. But you cannot ignore the fact that it’s hard for doctors to make a living in Hawaii, especially compared to what they can earn on the mainland.
The obvious solution is to embrace policies that lower our cost of living. But we should also think about addressing the laws and regulations that directly affect doctors and to successfully operate private practices in Hawaii.
One place to start would be the state’s general excise tax. Did you know that Hawaii is one of only two states that broadly taxes medical services?
Additionally, the GET adds significant overhead costs to every private medical practice in the state because it cannot be passed on to Medicare or TRICARE patients.
As local doctors have told Hawaii lawmakers, the GET can be the difference between a viable practice and one that is financially unsustainable.
During the election season, our new governor, Josh Green, repeatedly talked about eliminating the GET on food and medicine. While that would be a sound way to help reduce the cost of living in our state, the proposal should include a GET exemption for all medical care. Hospitals and nonprofits are actually already exempt from the GET, so extending that to all medical services would be a logical way to reduce the tax burden on both doctors and patients.
A GET exemption for medical services would not solve the doctor shortage. But it would help make it easier for private practice doctors to operate in our state and could also be the difference-maker for a doctor trying to decide whether to stay or pack up and leave for the mainland.
Reducing medical costs for patients is an important consideration as well. Is it right that the state benefits by earning tax revenue from people seeking medical care?
This year, Hawaii’s Legislature should help address the physician shortage by exempting medical services from the GET. It’s a simple and logical way to improve Hawaii’s healthcare system, both for doctors and patients.
KELI‘I AKINA is president and CEO of the Grassroot Institute of Hawaii.