What we ‘need’ is to fix Hawaii’s healthcare laws

by Keli'i Akina, Ph.D. President, CEO Grassroot Institute, September 18, 2021

Throughout Hawaii’s declared public health emergency over the past 18 months, many of the rules and orders issued have been less about the disease in question and more about reducing stress on our state’s public health services.

But if the surge in COVID-19 cases is overwhelming our healthcare capacity, shouldn’t we also take a closer look at the government policies that have contributed to the problem?

Healthcare access is a complicated issue, and no single policy is responsible for the problems we now face. But it is undeniable that our own laws have played a part in this crisis. In other words, to some extent, the stress on Hawaii’s healthcare system is less the fault of COVID-19 than our own regulations.

Some of those problems are so obvious that the governor dealt with them in his earliest proclamations. Restrictions on telehealth and licensing for out-of-state practitioners were lifted at the outset. But there are other laws and regulations, some more complex, that continue to throttle healthcare in Hawaii.

For example, Hawaii’s doctor shortage continues to worsen, and it’s a problem that will inevitably spread unless we do something about it. Even before our current state of emergency was declared, the state needed nearly 800 doctors and about 2,200 nonphysician healthcare personnel.

Hawaii’s high cost of living plays a large role in the doctor shortage, but that’s not the only factor. Local physicians will tell you that Hawaii’s policy of applying the general excise tax to medical services is particularly burdensome.

According to research from the Grassroot Institute of Hawaii, a medical services exemption from the state’s 4% GET would save about $5,275 each for the approximately 38,000 full-time workers in the medical industry.

If the GET exemption led an additional 820 physicians to set up shop in the state, it would result in an increase of almost 4,000 full-time positions in the industry, 4,000 additional supplier and induced jobs, $1.4 billion in additional economic activity and about $67.3 million in taxes. Would more doctors and medical industry staff in Hawaii help ease the pressure on our hospitals in any future health emergency? Of course they would.

The lack of medical facilities is also self-inflicted. Hawaii’s broad certificate-of-need laws require that investors prove there is a “need” for their proposed new services — such as a new hospital, imaging center, rehab facility or dialysis center. Too often their proposals are denied.

Grassroot Institute research shows that since 2006, state officials have rejected over $200 million of private healthcare investment covering over 200 hospital beds, including 25 ICU beds, to the point where Hawaii has among the fewest hospital beds per capita in the nation.

And here’s something that would be funny if it wasn’t sadly true: CON laws are sometimes referred to as a “competitor’s veto,” because that’s essentially what they are. At the state hearings, “interested parties” can testify on whether an area truly “needs” the proposed new facilities or services. Such parties include the owners of existing facilities, so the local hospital, rehab center or dialysis center gets to weigh in on whether the government should greenlight a potential rival.

Unsurprisingly, the existing “interested parties” tend to oppose the idea — which is what you could expect if, say, McDonald’s and Burger King had veto power over whether you could open a new burger restaurant in your neighborhood.

A better approach would be to let healthcare entrepreneurs, risking their own resources, decide whether it makes sense for them to build new facilities or services. As the states that have repealed their CON laws have discovered, healthcare access tends to improve when government officials are relieved of having to decide what is “needed” or not.

According to a study from the Mercatus Institute — mentioned earlier this week in an excellent article by Civil Beat reporter Kirstin Downey — Hawaii has the highest number of certificate-of-need restrictions in the country. By comparing costs and outcomes in states with restrictive certificate-of-need laws and those without, the Mercatus Center determined that CON laws have increased annual per capita healthcare spending in Hawaii by $219 and reduced the number of healthcare facilities in the state by about 14.

These are additional facilities that could have been available to us when the coronavirus first appeared in the islands in March 2020. Wouldn’t it be nice if they were available to us when the next public health emergency presents itself?

While we hope Hawaii never has to face another public health emergency like COVID-19, it is foolish not to prepare for the worst. After all, this won’t be the last challenge our state faces, and improving overall healthcare access and quality is itself a worthy goal.

Being prepared means removing the obstacles that the government has placed in our path. That’s what we “need” to improve Hawaii’s healthcare and eliminate the problem of overstressed and overcrowded hospitals.

---30---

Related: “The biggest reason Hawaii doesn’t have enough beds is that certificate of need requirement”