The Maui News - Weekender
General excise tax waiver for medical services would benefit Maui
Thanks to the state general excise tax, Maui residents pay millions of dollars more for health care every year.
The base rate of the tax, commonly known as the GET, is 4 percent. All of the counties except Maui also tack on an additional 0.5 percent. But in any case, the tax applies to almost everything that is sold in the state, whether food, clothing, mechanical services or medical care — to name just a few.
That’s not good news for Maui residents who go in for their annual checkups. While not-for-profit hospitals, including Maui Memorial, are exempt from the excise tax, private practice doctors are not. As a result, they commonly pass along some of the extra cost of the GET to their patients.
At a time when almost 60 percent of state residents report facing delays in getting adequate medical care — according to a 2022 “Access to Care” report — higher taxes certainly don’t help.
“To tax people just because they’re sick or injured just really makes no sense,” Hawaii island radiologist Scott Grosskreutz said at a health care forum hosted by the Grassroot Institute in Kahului last year.
Doctors have been speaking out against the GET because it makes life harder for them as well. Hawaii is one of only two states — the other being New Mexico — that taxes medical care like all other goods and services.
This presents doctors with a dilemma: Either increase the prices they charge their patients — something no caring physician wants to do — or take the tax out of their own paychecks.
Along with low Medicare reimbursement rates and Hawaii’s high housing prices and high cost of living in general, the excise tax serves as yet another reason for physicians to stay away from the Aloha State.
Grosskreutz, a member of the Hawaii Physician Shortage Crisis Task Force, said Hawaii’s tax system makes it “extremely difficult” for private medical practitioners to stay in business.
Maui radiologist Elizabeth Ignacio, who also appeared at the Kahului forum last year, noted that the state’s massive health care staff shortage has left many patients facing significant delays in being treated — especially after the COVID-19 pandemic, which caused many physicians to burn out.
“We see a lot of our colleagues retiring, moving away and reducing their hours,” Ignancio said.
She noted, too, that Hawaii has “one of the most senior-aged physician workforce, and I watch a lot of my senior colleagues who can’t retire, who won’t, because their patients are begging them to stay. … We have shortages of nurses, therapists, psychiatrists. We have so many different health care worker shortages, and they’re all compounding each other.”
The numbers bear this out. Statewide, Hawaii lacks almost 780 doctors, according to the University of Hawaii’s annual physician workforce report released last month. Maui’s deficit is 167, up from 158 the previous year.
Thankfully, Hawaii lawmakers have taken notice. A half-dozen bills to exempt medical services from the GET have been introduced in the state House and Senate — with Maui lawmakers leading the way.
Sen. Angus McKelvey of Maui has sponsored a bill, Senate Bill 1128, that would completely exempt physicians and advanced practice registered nurses from the excise tax. He also is co-sponsoring three other bills that would exempt medical services from the GET, either wholly or in part.
Maui County’s Sen. Gil Keith-Agaran, Rep. Terez Amato and Rep. Mahina Poepoe have co-sponsored legislation to the same effect.
A 2020 Grassroot Institute of Hawaii report estimated that exempting Medicare, Medicaid and TRICARE payments from the excise tax alone could save doctors more than $14 million a year. A complete exemption would save about $222 million annually for residents and health care professionals, according to the study.
A GET exemption for medical services would not be a silver bullet that solves the doctor shortage. State and county lawmakers still must address many other policies if they want to bring more doctors to the state, including medical licensing and certificates of need, the state income tax and even homebuilding, since doctors considering moving here sometimes are unable to find housing.
But exempting medical services from the GET would be an excellent first step — not only for Maui residents but all residents statewide.