By Keli‘i Akina

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.

By Keli‘i Akina

Yesterday was the last day of Hawaii’s 2024 state legislative session, and what a session it was.

The best news to come out of it was that our lawmakers passed a major income tax-relief bill, HB2404, which Gov. Josh Green is almost certain to sign because it was part of his much-touted “Green Affordability Plan.”

In fact, passage of this historic measure is the best legislative news not only of this past week but in all of recent memory.

My colleagues and I at the Grassroot Institute of Hawaii have been supporting Gov. Green’s plan for income tax relief since he unveiled it last year. And, of course, we have been recommending tax relief for even longer than that.

Enactment of HB2404 will help offset the crippling inflation of the past few years; save Hawaii taxpayers billions of dollars in coming years; reposition the state from having one of the highest state income tax rates in the country to one of the lowest; lower Hawaii’s cost of living; fuel economic growth; and reverse or at least slow down the ongoing exodus of Hawaii residents.

This is an amazing achievement — worthy of national attention — and many people deserve credit for its passage.

Foremost among them is Gov. Green, who is setting a new direction for relieving the tax burden of Hawaii residents and improving our economy.

I also want to thank the Legislature’s funding committee chairs, Sen. Donovan Dela Cruz and Rep. Kyle Yamashita, for seeing the economic benefits that this tax cut holds for the future of Hawaii.

Of course, this isn’t a victory for just the Grassroot Institute, which has worked hard to see that this and other important goals were achieved.

It’s a victory for all of Hawaii, and especially for “E hana kākou” — working together — to find common ground and make Hawaii a place where we all can thrive and prosper.

Other big wins we achieved by working together were the passage of housing bills SB3202, which aims to clear regulatory barriers statewide to homeowners wanting to add accessory dwelling units to their properties, and HB2090, dubbed the “adaptive reuse” bill, which could make it easier for homebuilders to convert underutilized office and commercial buildings into residences.

A national housing group unexpectedly reached out to Grassroot on Thursday to praise these as “solid bills” and the “first major pro-housing reform bills” to be passed by state legislators anywhere in the U.S. this year.

The first of the two bills, SB3202, was especially challenging to pass. The proposal ran into a fair amount of NIMBY (not in my backyard) opposition. But courageous and tenacious legislators at the Capitol — and the rest of us who were working together to support the bill — held fast, and ultimately it prevailed.

Our allies on that bill included the Hawaii Appleseed Center for Law and Economic Justice, Hawaii YIMBY, Housing Hawaii’s Future, Hawaii Zoning Atlas, Holomua Collective, AARP, all the Chambers of Commerce, and everyone who signed on to this letter in support of the bill.

Special thanks are due to House Housing Chair Luke Evslin, House Speaker Scott Saiki, House Judiciary Chair David Tarnas, Senate Housing Chair Stanley Chang, Senate President Ron Kouchi, and even U.S. Sen. Brian Schatz — all of whom were critical to seeing that these bills crossed the finish line.

Another one of our priorities was passage of SB1035, which aims to exempt private practice doctors and dentists from paying the state general excise tax on care covered by Medicaid, Medicare and TRICARE.

This issue has been a Grassroot priority for years. In fact, Grassroot issued its first policy brief on this issue back in 2020, then wrote about it again in early 2023.

Others who deserve tons of credit for the bill’s success are Dr. Scott Grosskreutz and all his colleagues with the Hawaii Physician’s Shortage Crisis Task Force; Dr. Jack Lewin of the State Health Planning and Development Agency; Sens. Lorraine Inouye and Joy San Buenaventura; Senate Ways and Means Chair Donovan Dela Cruz; and House Finance Chair Kyle Yamashita. All of these individuals recognized the importance of this tax exemption, which puts Hawaii in line with every other state in the country.

I also commend the Legislature for resurrecting last year’s bill on temporary nursing licenses, SB63, as a stopgap approach in lieu of passing a bill that would allow Hawaii to join the official Nurse Licensure Compact. I was disappointed that the compact bill failed, but hope to see it reintroduced next year.

Recognition for the passing of the temporary licensure bill goes to the Healthcare Association of Hawaii, Queen’s Health System, Hawaii Pacific Health and Kaiser Permanente Hawaii. In addition, both legislative health committee chairs — Sen. Joy San Buenaventura and Rep. Della Au Belatti — were great advocates not only for the temporary license solution but also the compact proposal.

And last but certainly not least, thank you, my readers, for helping make this year’s Hawaii legislative session so successful. Friends of Grassroot submitted thousands of letters to their legislators in support of good bills and in opposition to bad ones — and if you weren’t sure before, you can know now for certain that your messages do make a difference. I am grateful for your efforts to have your voices heard.

Looking ahead, my colleagues and I will soon be gearing up for next year’s legislative challenges.

But today, I simply want to thank all who have worked together so passionately and diligently for a better Hawaii.
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Keli‘i Akina is president and CEO of the Grassroot Institute of Hawaii.