The campaign to exempt medical services from the state general excise tax took to the airwaves this past Sunday with an appearance by Keli‘i Akina, president and CEO of the Grassroot Institute of Hawaii, on the H. Hawaii Media radio network.
Host Johnny Miro asked Akina to explain why the Institute initiated a petition drive to achieve such a tax break, and how its success could help alleviate the state’s acute doctor shortage.
Akina said the petition was initiated “because people don’t realize the extent to which the state general excise tax — which a lot of people call a sales tax, although it’s a lot more than that — has a negative impact on the ability for doctors to make money here in Hawaii. And we believe our petition will make a difference.
“If we exempted medical care from the general excise tax,” he said, “it would save doctors and patients more than $200 million [a year]. And that would help keep doctors in our state, rather than having to flee the state to earn money elsewhere. And that’s why we started the petition.”
Asked to explain how the GET actually works, Akina said it is “kind of like a sales tax, but we don’t want to simply call it that, because it applies to commercial transactions at almost every level,” which results in a “pyramiding or a cascading effect that makes the total amount paid by consumers even higher than what the GET rate says it is.”
He said the tax also is regressive, “in that the burden of this falls most heavily on lower-income residents who have less money to spend.”
In terms of Hawaii’s healthcare crisis, he said, “the GET applies to almost every business, including for-profit medical clinics in Hawaii. So hospitals, which are mainly nonprofits, are exempt, but many other healthcare providers are not. So they must pay the state GET of 4% on their gross incomes, plus whatever the counties add on as a surcharge.
“As you look across the nation,” he added, “Hawaii is one of only four states that taxes medical care in this way. And it really is a big burden on doctors and, ultimately, upon patients who can’t get the care that they need.”
Akina told Miro he is optimistic the petition will succeed because it has bipartisan support and because it is “something that’s going to help everyone.”
To hear the entire interview, click on the video below. A complete transcript follows.
10-23-22, Keli‘i Akina with Johnny Miro on H. Hawaii Media radio network
Johnny Miro: Good Sunday morning to you. I’m Johnny Miro. It’s time for Sunday morning public access programming here in the H. Hawaii Media family of radio stations on the island of Oahu — Oldies 101.1 FM, 101.5 FM, 97.1 FM, also 107.5 FM, 96.7 FM and 103.9 FM.
Joining me once again from Grassroot Institute of Hawaii would be the president and CEO, Keli’i Akina. Good morning to you, Keli’i. Happy Sunday to you.
Keli’i Akina: Johnny, it’s great to be with you and all of your listeners. Aloha.
Miro: Oh, just when you thought we had everything figured out as far as a doctor shortage is concerned — and we spoke about this a few weeks back — something new has taken hold, and we’re here to discuss that once again. So that’s the topic for today: the doctor shortage continuing in Hawaii, and what can be done to solve it.
So you folks over there at Grassroot Institute of Hawaii recently launched a petition, I understand, to exempt medical services from the state general excise tax. Can you tell me more about it? And do you think this will help solve the doctor shortage?
Akina: That’s absolutely right, because people don’t realize the extent to which the state general excise tax — which a lot of people call a sales tax, although it’s a lot more than that — has negative impact on the ability for doctors to make money here in Hawaii. And we believe our petition will make a difference.
If we exempted medical care from the general excise tax, it would save doctors and patients more than $200 million [a year]. And that would help keep doctors in our state, rather than having to flee the state to earn money elsewhere.
And that’s why we started the petition.
Miro: OK, about the petition, before we get there, once again, can you give the listeners just a brief background on the GET?
Akina: Well, the general excise tax is kind of like a sales tax, but we don’t want to simply call it that, because it applies to commercial transactions at almost every level. This results in a pyramiding or a cascading effect that makes the total amount paid by consumers even higher than what the GET rate says it is.
It’s also regressive in that the burden of this falls most heavily on lower-income residents who have less money to spend.
In terms of Hawaii’s healthcare crisis, the GET applies to almost every business, including for-profit medical clinics in Hawaii. So hospitals, which are mainly nonprofits, are exempt, but many other healthcare providers are not. So they must pay the state GET of 4% on their gross incomes, plus whatever the counties add on as a surcharge. And that can bring it to a total of 4.75%.
As you look across the nation, Hawaii is one of only four states that taxes medical care in this way. And it really is a big burden on doctors and, ultimately, upon patients who can’t get the care that they need.
Miro: Mmm, hmm. Grassroot Institute of Hawaii president and CEO Keli’i Akina joining us this morning.
So what do you think the human cost of this tax is? I know some people would say, “Doctors, they make a lot of money, so it’s fine that they pay this tax.” So is there a flaw in that reasoning?
Akina: Oh, absolutely. Because it’s not the case that most doctors are making all that much money. And so many of them are suffering financially that they’re shutting down shop and leaving Hawaii. And many recent graduates of medical school are deciding not to go into medical practice as a business for themselves.
Here in Hawaii, doctors are moving away. We’re seeing a mass exodus of many people from the islands, and we’ve talked about that a lot. But every time we hear about a tax increase, doctors and other entrepreneurs call our office and tell us that they’re moving away. And that weakens our health system and hurts the public, ultimately.
If you live on a neighbor island, for example, you know how hard it is to get a specialist or even a regular doctor much of the time. You’ve got to either come to Oahu or, in some cases, go to the mainland. And that’s really hurting people.
Miro: I’m not correlating healthcare to a restaurant, but it’s just like anybody trying to make the bottom line of a business. They say, “OK, you can just pass it on.” Can doctors just pass this tax on?
Akina: Well, it’s not that easy. They actually can’t. Federal rules bar doctors from passing it along to Medicare and TRICARE patients, who make up a pretty big percentage of Hawaii’s residents. So doctors just take the loss, and that’s one reason we’re seeing so many private practices closing shop.
It also deters doctors from moving here, since they’re well aware that Hawaii’s tax structure is hostile to medical personnel. Basically, the tax has the effect of raising prices and discouraging healthcare workers from practicing in Hawaii. And that’s why, at Grassroot Institute, we’re working so hard to exempt medical services from the GET.
Miro: Alright, you could find out more about this at grassrootinstitute.org. Keli’i Akina, president and CEO, with us this morning.
And the petition drive — is that what this is about?
Akina: Right. Yes, absolutely. The Grassroot Institute has launched a petition calling for state lawmakers to exempt medical services from the GET. We’re currently collecting signatures and we’ll be presenting the petition to lawmakers in January just to let them know how many people in Hawaii favor this.
Miro: OK. Well, I wish you the best of luck with that. What do you think the chances are the lawmakers will actually take this petition seriously?
Akina: Well, we’re very optimistic on this one. For example, both candidates for governor, Democrat and Lt. Gov. Josh Green and Republican Duke Aiona, have supported the idea of exempting medical services and so it’s bipartisan in support.
And several legislators also support a GET exemption, including Republican Gene Ward and Democrat Lisa Kitagawa. So this is not a political endeavor. This is something that’s going to help everyone.
A GET exemption bill passed the state House back in 2020, but with the coronavirus lockdown, it got derailed, and a lot of other measures as well got derailed.
I think things are normalizing just a little bit, so that we’re able to pay attention to some of these more profound recommendations. We’re very hopeful this year that lawmakers will follow through with the GET reform.
Miro: It does sound promising. Does anyone oppose it? If so, what are they saying?
Akina: Well, I’ve not heard that many people oppose this measure, but some have expressed concern that a GET exemption might have a negative effect on the state budget. In other words, less GET tax money for the state budget.
A tax on medical services gives the state about $200 million a year in revenue. So lawmakers would have to find programs to cut or shift their spending priorities.
Now, Gov. [David] Ige has expressed concern that exempting medical services from the GET might lead lawmakers to raising taxes in other areas.
Those are valid concerns. We recognize that. But we believe that the state’s budget is large enough already and could use some trimming.
Now, of course, lawmakers are usually happy to spend money on making healthcare more affordable. So we think they’ll be willing to forgo tax dollars to make it more affordable as well.
Bottom line: We know there’s enough to trim from the state budget that could cover this, and we’re hoping that our lawmakers will do that instead of continuing to provide this disincentive to medical practice in Hawaii.
Miro: You’ve been very busy, but the institute recently hosted several forums on Hawaii’s healthcare policy, is that right?
Akina: Yes, that’s right. We put on three events recently, on Oahu, Maui and the Big Island, featuring experts who are interested in making Hawaii a more welcoming place for health professionals to practice. We had dozens of attendees on each island, including healthcare professionals, lawmakers and journalists.
Miro: OK, and the general message of those meetings?
Akina: Well, we basically learned three things from these experts.
First, Hawaii’s healthcare crisis is actually getting worse, not better. And they spoke firsthand about their observations, as well as a look at the data.
Secondly, the neighbor islands are especially hard-hit. It’s becoming harder and harder to get medical care if you don’t live on Oahu.
And third, there is a wide array of policies that can address the problems we’re running into. And so really, as pessimistic as these panels began, we concluded our sessions very optimistically, hopefully looking at solutions that our government will put into play.
Miro: OK. Well, can we address these in order? Tell me about Hawaii’s healthcare issues. I know we spoke about this back in August to discuss the healthcare crisis. Can we once again go over those or what you’ve discussed?
Akina: Sure, I’ll give your listeners a quick refresher. Basically, the state is short around 1,000 physicians right now. This shortage means that many patients have to wait a long time for care — if they can get it at all. And, our current physicians are overworked. They’re working 60 to 70 hours a week.
And because of Hawaii’s high cost of living and other factors, doctors are leaving. In 2019, 152 physicians moved to other states, and that’s huge for our size of population. So it hasn’t magically been fixed since August.
Miro: OK, did you learn anything new after these forums then?
Akina: Oh, yes, quite a bit. We had some fascinating speakers.
Dr. Scott Grosskreutz, a Big Island radiologist, told us that many of Hawaii’s doctors are nearing retirement age. One-quarter of the doctors in our state are now over age 65. On the Big Island, a third of the doctors are older than 65. That gives lawmakers an inescapable timeline. Once these doctors retire, Hawaii’s healthcare problems are going to get definitely worse.
Miro: You said the neighbor islands are suffering, taking the brunt of the doctor shortage. How so?
Akina: Well, the neighbor islands lack doctors for many specialties. Jim Winkler, CEO of the Kauai Community Health Alliance, illuminated us on the challenges Kauai faces. He told us Kauai has no psychiatrists, outpatient neurologists, endocrinologists and oncologists.
Akina: Any time someone needs to see a psychiatrist, for example, they must fly to Oahu. Now, that’s money out of their pocket for airfare and Uber, taxi and maybe sometimes a hotel room. And many patients may not have the money to afford this kind of trip, so they simply go without medical assistance.
And that’s quite severe in terms of psychiatric care, especially for those who are of lower income and have other challenges than surviving in life. That’s how bad it’s gotten.
Miro: Alright. So, Keli’i, how did the public basically react to these forums? Did you find that people generally agree that there is a healthcare crisis?
Akina: Oh, yes, overwhelmingly. People agree with it because they see it happening. We took a video of one of the forums and posted clips of it on social media on the TikTok site. So far, those clips have logged almost 1 million views. Now, that’s interesting for such a topic.
Many doctors, nurses and other healthcare workers have commented on the video clip, saying things like, “I used to work in Hawaii, but I moved because it was so expensive,” or “I want to move to Hawaii, but I can’t afford to.” And many doctors and nurses have emailed us in response to our newsletter articles and my weekly column, telling us how bad the problem is.
Miro: So, exactly what are they saying, Keliʻi?
Akina: Well, one nurse from the mainland sent us a video saying that she worked on Hawaii island to help during the pandemic. And she was shocked that Hawaii didn’t have the health resources that they take for granted on the mainland.
There were thousands of others who wrote us similar messages. Many people are observing that, in some ways, we’re like a Third World nation in terms of our medical resources available to the public.
Miro: Alright. Enough doom and gloom, I guess. Other than the exemption, how are we going to fix this problem? And from everything you’ve just laid out, it seems obvious, but why aren’t more doctors moving to Hawaii?
Akina: Well, that’s what everyone is asking. Youiknow, there is no silver bullet for solving this situation. It’s taken decades upon decades to get us into this situation, and so we’re going to need to do some significant things.
Now, there are, however, steps that we can take. At the Grassroot Institute, we have identified these. And we are promoting them to our lawmakers.
One would be to reform the state’s certificate-of-need laws, also known as C-O-N laws, “CON” laws. That’s certificate-of-need laws.
Another would be to reform the state’s occupational licensing laws, which restrict who can practice medicine in Hawaii, or sometimes prevent them from practicing here at all — even if they’re licensed in other states.
Many doctors have mentioned that the federal Medicare and other insurance reimbursement rates are too low and they need to be raised.
And of course, there’s the issue of housing. Why would healthcare workers want to live in Hawaii if they can’t afford a place to live?
This is actually a major problem for many hospitals who are trying to hire nurses and other medical personnel from the mainland. When people look at the cost of living and the affordability of housing — or the lack of affordability of housing — they simply decide not to come here to be a doctor or a nurse.
Miro: Keliʻi Akina, president and CEO of Grassroot Institute of Hawaii. Grassroot Institute of Hawaii, grassrootinstitute.org/get, correct?
Miro: OK, alright. For the latest one, so circle back to housing. I’ll get back to that, but let’s change gears for just a second. Have lawmakers done anything to address the healthcare crisis recently?
Akina: Well, Gov. David Ige announced earlier this month that the state will spend $2 million to hire more nursing instructors at the University of Hawaii. That’s been in the news. And it’s been heard that many applicants to nursing school were not accepted because UH did not have enough teachers.
So this decision may help train more qualified nurses, but it won’t matter very much if they don’t stay in Hawaii. If they leave because of our high cost of living, we’ll be training people who actually will be performing their practice on the mainland. We haven’t really solved the problem yet.
Miro: OK, back to housing, I know you mentioned it just a little while ago. How does housing really relate to this healthcare issue, all the healthcare problems we have?
Akina: Well, that’s important to look at. Doctors and nurses need a place to live, just like everyone else. A recent review showed that nurses in Hawaii make more than nurses in almost any other state. Their average annual salary is more than $100,000 — until you adjust it for the cost of living, which here in Hawaii is the highest in the nation.
Once you do that, Hawaii nurses are paid less on average than nurses in any other state. So do the math. The salary is not the key factor. It’s the ability to afford housing, food, education for your children, and so forth.
Their average salary, then, for nurses looks more like $55,000 purchasing power. It’s just hard for everyone in Hawaii to stretch their paycheck. And of course, housing is part of that.
Miro: So how are we going to bring down the price of housing? I know there’s been a big issue, Grassroot Institute at the Legislature.
Akina: Yes, it’s one of Hawaii’s primary challenges. Without getting too much into the weeds, here are just a few things the state and counties can do.
>> Allow housing projects to be built without layers of political approval,
>> Allow more duplexes and triplexes.
And we could go on. And we’ve listed a set of solutions on our website at grassrootinstitute.org.
Now, of course, there are numerous other policies that could be passed, but these that I’ve mentioned would be a great start. People don’t normally think of housing and healthcare as connected. But in Hawaii, they most certainly are.
Miro: That’s definitely for sure. You’ve really connected them. Well, mahalo for discussing Hawaii’s doctor shortage, Keli’i, with me, including, you know, what we can do about it.
You folks are doing your part — more so than I can really think of anybody — but can you remind listeners how they can sign your petition to give a tax break for medical services?
Akina: Absolutely. Your listeners can access the petition online at grassrootinstitute.org/get. Now, that’s an open website where you can sign up for our newsletters, our weekly reports and any other information you want.
Thank you, Johnny, for letting me be on your show again. I appreciate it greatly. I appreciate your listeners. I believe they’re making a difference as they contact their public leaders with the ideas that will work for Hawaii.
Miro: Very important topic — among many that we’re dealing with here — and you folks are front and center once again, as usual. Grassroot Institute of Hawaii. Have a fantastic Sunday. Thanks for joining us once again, Keli’i, and we’ll talk to you soon.