Some of Rush Limbaugh’s critics are spinning the popular conservative talk show host’s remarks about healthcare after he was released from Queen’s Medical Center in Honolulu on January 1, 2009. After spending a few days in Hawaii on vacation, he was hospitalized with severe chest pains.

In a press conference from Queen’s Medical Center, Limbaugh said “Based on what happened to me here, I don’t think there is one thing wrong with the American health care system. It is working just fine, just dandy.”

SEIU notes in its piece entitled “Hell Freezes Over: Rush Limbaugh Loves Union Hospitals and Socialized Medicine,” that “Hawaii is a shining example of progressive health care reform,” and Anthony Wright in ‘The New Republic’ touts Hawaii’s healthcare mandates as a success.

I can give a personal perspective on Hawaii’s Prepaid Health Care Act since I have been familiar with and opposed to it since before it became law in 1974.

When I was the economist at Bank of Hawaii, I provided an analysis of the proposed Act and found it another negative impact on Hawaii’s small business community and our business climate. During the three-plus decades I have been involved with it from a legislator’s point of view as well as an employer. Let me briefly address some of Wright’s points:

Limbaugh, who was treated at the Queen’s Medical Center, discussed health care vs. health mandates. There is a difference and even though Anthony Wright in his ‘New Republic’ piece, “Limbaugh Hearts Health Reform,” would try to confuse us, Limbaugh was very specific. His was a re-confirmation of the excellence in private health care in America, even though Obamacare seeks to trash the industry and the professionals in it.

Limbaugh was not covered or subsidized as an employee under Hawaii’s unique government law. Our law mandates that employers pay for every employee, “who works more than 19 hours per week.” That includes every employer, regardless of size or the number of employees. One size attempt to fit all. Pre-existing conditions were excused from the start, except that some of the providers were allowed to place some restrictions on some conditions. However, this clause has resulted in abuses, lack of fairness and added costs.

Queen’s Medical Center is Hawaii’s leading cardiac medical hospital. It is private, and performed the state’s first transplant a few years after the first ever transplant. The facility is known for its level of expertise, professionalism and care. Hawaii’s mandatory Prepaid Health Care Act (PPHCA) is a government financing mechanism that places a burden on all of Hawaii’s employers and has nothing to do with health, medicine or care. So, Limbaugh was correct in praising the medical care he received at our best private facility.

Mr. Wright neglects to mention that prior to the enactment of the PPHCA in Hawaii, under a totally voluntary system, nearly 90% of the working population was covered by medical insurance (1972). It is true that over the first decade of the law, coverage did increase to more than 95%, but has since declined in the years afterwards. It is also true that the victims here are the small business owner-employers who must provide ever costlier medical premium care to their employees, without any input or decision making, while finding in many cases they cannot adequately have enough left to pay for themselves and their own families.

The unions and other original proponents of the Hawaii PPHCA said at the outset that their ultimate goal was “universal single payer” government insurance. That has not occurred. A crazy quilt of changes and amendments has occurred instead.

Mr. Wright is correct that Hawaii’s law is unique. Following a court challenge (by Chevron in Hawaii) there needed to be an exemption to the federal ERISA-interestingly enough supported and assisted by President Richard Nixon. PPHCA was the Nation’s first and only government program of its kind. Wright neglected to mention that the proponents boasted (1) that Hawaii was in the forefront of medical reform and that soon, nearly every state would follow our lead, and (2) this would be a fair and equitable “sharing” of medical premium costs by employer and employee-50-50-in order to keep medical costs down.

Since 1974, no state has followed Hawaii. Since the beginning, there was never a 50-50 cost sharing (70-30 at best). Employers could charge employees for a very small portion of the premium cost (1/2 of 1% of their gross wages) but few did then when premiums were relatively low and now when the premiums are much higher. It is a cost of business here.

In 1994, when it was found that large numbers of state public employees were not covered by health insurance and that the State Government did not follow its own law by hiring “emergency,” “temporary” or “casual” hires to avoid paying the PPHCA, the Hawaii State Legislature, in order to protect state workers, passed a bill forcing the government to cover all employees. The Democrat Governor at the time, John Waihee, vetoed the bill saying, “it was too costly for the state.”

Further, there was no choice by workers or consumers as to what kind of plan and what benefits they actually wanted to pay for. Opponents such as myself, argued if there must be a mandate (I oppose that), then it should only be for a “cafeteria” style approach so that basic medical coverage would be provided, but extra and extraordinary benefits would be purchased separately. That has never been the case.

Each major health care provider offers their version of their benefits package with no substitutions please. There was a Prepaid Health Panel set up to establish rules as to who could even enter the market and provide competition. Who controlled that panel? Until recent changes, it was the state’s largest provider, Hawaii Medical Services Association (HMSA) and the second, Kaiser Permanente. Several potential competitors were not allowed in the market. Changes in benefits were disallowed. Medical Savings Accounts were discouraged. Premiums continue to escalate unabated. Annual and semi-annual premium increases are double-digit, with smaller employers paying more of an increase than larger employers, Competition was throttled. HMSA and Kaiser enjoy non-profit tax exemption from the state’s General Excise Gross Income Tax (GET). The newest provider, Summerlin Insurance, must pay the GET.

Since 1974, the Legislature – as provided in the law – may add additional mandates, but cannot change the financial arrangement between employer and employee or reduce any benefits. There have been dozens of additional costly benefits added and the employer must suck up the added costs. Mental health parity, numerous medical procedures and supplements have been added to the providers’ offerings. Strong lobbying by special interest groups added additional required coverage. My favorite continues to be mandatory in vitro fertilization on everyone’s health plan at a cost per procedure of $10,000 or more. Is this health care? It is government determination of “care.”

And what has happened to jobs and employment in Hawaii? Wright cites some left-wing studies, the Huffington Post and ThinkProgress to substantiate the position that all is well in “Paradise.” But talk to employers, particularly small business employers, and you get a different answer.

Many jobs have gone begging because of the PPHCA and other Hawaii mandate costs. Wright alludes to the well-known fact that many employees are placed on part-time, less than 20 hours per week, in order to avoid the high costs of the PPHCA. That results in many employees having 2-3 part time jobs with no medical benefits.

The Hawaii unions’ answer (as proved by recent introduced legislation in Hawaii)? Make the coverage mandatory if an employee works one (1) hour or more per week. And make it permanent once a person is hired.

There are other conditions that should be taken into consideration when hawking Hawaii’s government mandate. For example, the lack of medical tort reform in Hawaii-which every medical professional cites as a major cost burden-has resulted in the departure of dozens of medical practitioners in Hawaii-especially in rural and Neighbor Island areas. Tort reform has conveniently been dismissed by President Obama and the House and Senate. Government set medical repayment schedules are placed artificially low by both government and providers such as HMSA. Under Hawaii’s PPHCA, the amount of patient reimbursement is generally limited to “usual and customary charges” as determined by the provider and this may be well below the actual and total charges incurred by the patient. Costs continue to spiral upward and while we discuss innovation in energy, transportation and other areas, there is no cost innovation under Hawaii’s mandatory act.

Finally, it should be noted that Hawaii’s Democrat Congressional delegation sought and received an exemption from the current House-Senate Obamacare bills. They just weren’t as smart or as good a negotiator as Nebraska’s Senator Nelson.

Hawaii has many firsts: the nation’s only single, statewide school district (which now boasts the lowest number of instructional days per year and terrible test scores) and little flexibility; the Nation’s only Gross Income General Excise (not sales) Tax on every goods and service transaction (resulting in pyramiding of the 4.5% to an effective 18% sales tax rate and no flexibility); the highest personal income tax rates and third highest overall tax burden, and the mandatory Prepaid Health Care Act with high costs, little choice and even less flexibility.

Follow Hawaii? For sunshine, the Aloha Spirit and shave ice, but not government health mandates.

‘Sam Slom is a Private Consulting Economist and Small Business Owner, a State Senator, 8th District, R-Minority Floor Leader, and President of the Small Business Hawaii Entrepreneurial Education Foundation. Reach him at mailto:sbh@lava.net’

Comments

comments