We Have a Health Care Crisis – And Our Taxes Aren’t Helping

by Tom Yamachika, President, Tax Foundation Hawaii

We have a health care crisis on our hands.

According to a study by the University of Hawaii School of Medicine, there is a shortage of physicians in Hawaii. The school has forecasted that the gap between supply and demand is now close to 1,000 doctors, and it has been getting worse over the years.

This shows a problem, although highlighted by the recent pandemic, that has been years in the making. According to reporting by the Grassroot Institute of Hawaii, Hawaii’s healthcare crisis includes a growing doctor shortage, lack of specialty care in rural areas, high emergency room wait times and the fact that we have among the fewest hospital beds per capita in the nation. Its causes include a low Medicare reimbursement rate, General Excise Tax (GET) applying to medical practices, and our sky-high cost of living.

Medicare, for example, is supposed to pay for health care for seniors that need it. Medicare will only reimburse medical work at “reasonable charges” and will not reimburse the doctors for the GET they have to pay. Doctors usually wind up absorbing the tax rather than attempting to surcharge their patients for it, meaning they have to account for yet another expense amidst Hawaii’s high cost of everything.

In our current legislative session, there is a bill (HB 1407 / SB 2020) to disallow the wholesale GET rate of 0.5% on a sale unless there is a resale at the retail 4% rate that follows it. The Department of Taxation testified strongly in favor of it, while different hospitals and health care organizations testified it would be a disaster for them. The House committee hearing it advanced the bill forward, while the Senate Ways and Means Committee deferred it. The fate of the bill is uncertain at this point.

There may be people out there thinking that, well, doctors are rich fat cats, so why shouldn’t we tax them up the wazoo? The short answer to that question is that they are going to jump on a plane and get the heck out of here – which is backed up by the statistics discussed earlier in this article. Then, of course, they won’t be around when you need them.

And we need them.

Wouldn’t you say so, legislators?