2023 State Legislature Should Have Done More To Address Hawaii’s Physician Shortage

Hawaii lawmakers agreed to raise the Medicaid reimbursement rates for all providers. As of press time, the Hawaii State Legislature hasn’t adjourned, but funds have already been allocated for the Medicaid reimbursement and added to the state budget, which should pass.

Medicaid reimbursement will be raised to match the Medicare reimbursement rate. That means physicians who accept Medicaid would see their reimbursement rate rise by 40%. This is substantial.

There are 450,000 people in Hawaii on Medicaid (medical coverage for low-income residents). That’s an enormous size, one-third of the state’s population. But because Medicaid reimbursement at the current rate is low, many doctors do not accept Medicaid patients.

This new rate, most likely, will change that and incentivize more doctors to accept Medicaid patients. With a pool of 450,000 people, it could be a windfall for Hawaii doctors struggling to make ends meet.

Doctors with medical practice in lower income neighborhoods and higher enrollment in Medicare, they could see their bottom line improve substantially. It’s a win-win situation for Medicaid patients and doctors who treat them.

Lawmakers added the Medicaid-to-match-Medicare reimbursement to the budget to help alleviate the physician shortage in Hawaii.

The raised reimbursement will cost a total of $73 million a year ($30 million from the state and a matching federal fund of $43 million).

Insurance reimbursement is lower in Hawaii compared to other states. Some experts say the rate hike will make a difference. Others say it could, but only hold off a physician from retiring or moving in the short term. Others point out raising Medicaid to match Medicare reimbursement is still playing catch up because Medicare reimbursement rate is already behind inflation. Congress should be raising Medicare reimbursement.

Most agree that the reimbursement hike will have some improvement, but more needs to be done for a more permanent fix.

For example, with regard to insurance reimbursement, changing some of the requirements by insurance companies and government would help physicians. As it is now, requirements are too complex and require a large, costly, and specialized administration staff.

This is not to say that government should not have regulations. Checks and oversight on industry are important, especially when it comes to healthcare. But requirements shouldn’t be extreme that doctors are closing their practice to join physicians groups to avoid doing their own insurance paperwork.

Assistance in paying down educational loans
Lawmakers this session also agreed to spend $10 million in 2024 and $20 million in 2025 to help medical professionals, including doctors, nurses and social workers to pay down educational loans.

This funding is also aimed at improving Hawaii’s physician shortage.

Medical school students upon graduating are facing a quarter-to-half a million dollars in debt.  Assistance to pay down educational loans could incentivize new medical graduates to practice in Hawaii.

Pass the GET Exemption
What would have been more effective in physician retention and recruitment than the Medicaid reimbursement hike and educational loan assistance combined is passing the GET on medical services provided by primary care physicians and APRNs.

It was a bill many in Hawaii’s medical community had high hopes for and confidence that it could have passed this session. But it will need to be revisited next year.  

Under Hawaii’s current law, the state general excise tax (GET) applies to health care services provided by group and private practice physicians. According to the bill’s text, Hawaii is the only state in the country that taxes medical services in this way. 

Hawaii’s physician shortage is worsening
According to data compiled by Dr. John Lauris Wade, a member of the Hawaii Physician Shortage Crisis Task Force, Hawaii’s physician shortage has increased for more than 10 years.

Based on preliminary numbers, in 2019 there was a 24% physician shortage (820 doctors) statewide. This year, the shortage has grown to 29%, or 1,014 physicians. It is unlikely that the trend will reverse itself as Hawaii also has the second oldest physician workforce in the nation, with 37% age 60 or older, according to data from the Association of American Medical Colleges.

2023 State Legislature’s response to the physician shortage
Lawmakers this session did make marginal prioritization in getting at least a few initiatives passed to address the physician’s shortage. But the GET exemption should have passed which would have sent a clear message to the public that they fully understand the magnitude of today’s medical workforce shortage.