A bill resurrected from last year’s legislative session to exempt medical providers from the state’s general excise tax will be heard today by the House Committee on Finance.
Senate Bill 1035 would exempt from the general excise tax medical service providers who receive Medicare, Medicaid and TRICARE (the health care program for uniformed service members, retirees and their families) payments.
The bill is specifically aimed at private care providers, because medical services rendered at a nonprofit hospital, infirmary or sanitarium are exempt from the general excise tax, while the same services rendered by individual or group practices or clinics are fully taxable.
Private practice physicians currently have to pay the tax and are forbidden from passing the cost to those patients.
Written testimony overwhelmingly supporting the measure was submitted before today’s hearing.
“Physicians who have left the state indicate that the extra cost of caring for Medicare, Medicaid and Quest patients makes it financially burdensome to continue practicing here. For the same reason, many physicians no longer see this group of patients,” wrote representatives from the University of Hawaii’s John A. Burns School of Medicine.
The Hawaii County Medical Society testified, “the most important thing of passing this bill would be to show the providers of health care in Hawaii that the Legislature is actually listening to the medical community. We believe that if this bill does not pass this year, many providers will simply give up and close their practices. We implore you to help try and save the remaining providers from a rapid death.”
West Hawaii surgeon and certified wound care specialist Alistair Bairos says the passage of the bill is one step that needs to be taken to retain physicians. Hawaii Island currently has a 41% shortage of physicians, a 10% increase over last year.
“It is blindingly obvious to anybody that there are not enough doctors or health care providers of any kind on this island or on Maui,” he told West Hawaii Today. “People come here and find out they can’t get doctors or it takes weeks or months to see them or you have to see specialists in Honolulu because they don’t live here. With the excise tax, two-thirds of all of the doctors in the state are already exempt. It’s also a matter of fairness. Why are the poor independent practitioners having to pay this tax when all these other docs that work at the hospitals don’t?”
Hilton Raethel, president of the Healthcare Association of Hawaii, has stated that if the GET was applied to Hawaii hospitals, most would have to either close or cut services.
Bairos said that is exactly what is happening to the primary care practitioners, and even though that is only part of the problem — low reimbursement rates being another — it is something the Legislature can address.
“It is one of the things that is easily fixable and is glaringly unfair. The margin on a medical practice is not very much anyway, and that 4% can be the extra thing that says, OK, we are out of business now, we can’t pay our bills,” he said.
The Kauai Community Health Alliance has been providing primary care on the island for 25 years and is about to close its doors because of insufficient funds.
“The reason our facility along with most private medical practices are shutting their doors is due to low insurance reimbursements, made exponentially worse because small rural practices have to pay GET tax normally passed on to patients,” said CEO James Winkler in written testimony. “Rural clinics all over our state are turning away Medicare and Medicaid Quest patients in order to simply keep their doors open. According to the 2020 Hawaii Workforce Assessment, of all the counties in the U.S., Kauai has the 13th worst access to medical care, Maui 5th and Big Island 3rd worst in the nation.”
Bairos said the bottom line is that because there is such a need for health care workers on the Big Island, anything that would keep them here has to be encouraged. If the state continues to loose private practice physicians, the tax collected would dwindle as well.
“If the docs kept that money, it’s not as if they then send it off to some bank in the Bahamas. They spend the money in the community,” he said.
