GET exemption could be turning point in Hawaii healthcare crisis

by Keli‘i Akina, President/CEO, Grassroot Institute, May 20, 2024

For years, doctors have been practically begging legislators for an exemption to the state general excise tax for medical services. And for just as long, some people have responded by asking why we are so concerned with the profitability of doctors.

To this, I have two responses.

First, and most important, if we want to help patients, we need to have doctors available to treat them.

Second, doctors are the ones who are ultimately responsible for paying the tax, so the language of any exemption has to focus on them.

This year, the Legislature finally listened to their pleas and passed SB1035. If enacted by Gov. Josh Green, the bill, starting in 2026, will exempt from the state general excise tax payments made to doctors and dentists by Medicare, Medicaid and TRICARE.

This will be great for Hawaii doctors, but even better, it will help Hawaii patients.

Hawaii radiologist Dr. Scott Grosskreutz, founder of the Hawaii Physician Shortage Task Force, told me this week that the passage of a GET tax exemption for Medicare, Medicaid and TRICARE is “great news for patients in these federal insurance programs.”

The GET exemption, he said, “will mean that more doctors, dentists and nurses can be recruited and retained to provide care in Hawaii in the future. So mahalo to our lawmakers, especially Sens. Lorraine Inouye and Joy San Buenaventura, for passing this legislation.”

Meanwhile, until the bill is actually signed into law, Hawaii remains the only state taxing Medicare, Medicaid and TRICARE payments for medical and dental services.

As my colleague Malia Hill explained in a Grassroot Institute of Hawaii policy brief issued last year, the tax puts Hawaii doctors in a difficult position. Since they are prohibited from passing on the tax to their patients, they must either pay the tax themselves and hope that lower profitability will not force them to close their practices, or avoid taking on Medicare and Medicaid patients completely — something that is both difficult and undesirable to do, especially in rural areas where patients already have limited options.

For instance, Jason Ching, CEO of Oahu Pediatric Dentistry, said in testimony in support of SB1035 that he tax “not only imposes an unjust burden on those committed to serving the community, but also contributes to the dwindling number of private practitioners able to afford care for Medicaid, Medicare and TRICARE patients.”

He said his dental practice “dedicates 40% of its services to Medicaid beneficiaries,” and the “financial strain of the GET, combined with the low Medicaid reimbursement rates” has made his practice “increasingly unsustainable.”

Assuming the bill becomes law, SB1035 will go far toward mitigating this problem.

Dr. Grosskreutz emphasized there still are improvements needed to increase healthcare access in Hawaii, but enactment of the GET exemption is an important step toward that goal.

I am hoping that Gov. Green, who is a doctor himself, will sign SB1035 soon.

Looking ahead, my Grassroot colleagues are researching other policy ideas that could further improve healthcare in Hawaii.

Many challenges remain, but we can meet them with the same spirit of cooperation that resulted in the Legislature’s passage of the GET exemption.
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This commentary was Keli‘i Akina’s weekly “President’s Corner” column for May 18, 2024. If you would like to have his columns emailed to you on a regular basis, please call 808-864-1776 or email info@grassrootinstitute.org.