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Why is there a doctor shortage in Hawaii?

It’s no secret that Hawaii has a healthcare problem

The state is short more than 1,000 doctors, which means some patients cannot get care, and the ones who do have to wait a long time. 

According to one recent survey, nearly six in 10 Hawaii residents have endured long delays in receiving medical care in the past year; for many patients, that can result in permanent harm or even death.

Doctor shortages are especially severe in the neighbor islands, where there are very few specialists. On Kauai, for example, there are no endocrinologists, psychiatrists, oncologists or outpatient neurologists. Anyone who needs these services must travel to Honolulu on the main island of Oahu, or even possibly to a mainland city, which means extra costs for airline tickets, hotel reservations and other necessities as well.

So why aren’t doctors moving to Hawaii? 

There are a host of reasons, but the state’s general excise tax, stringent licensing requirements and high cost of living all make it harder to be a frontline healthcare worker. 

The general excise tax

Unlike many states, Hawaii does not have a sales tax, which is levied on consumers only at the retail level. Instead, it has a general excise tax, which is a tax on the gross receipts of businesses.

The GET is applied at every transaction level,which means it pyramids in value as it proceeds to the final stage — the consumer — at which point the effective rate is actually greater than whatever the nominal rate might be. 

In Hawaii, the nominal rate is 4% tax, including for healthcare clinics. Three of the state’s four counties also add a surcharge of 0.5%. In the counties where the combined rate is 4.5%, the nominal rate consumers end up paying is 4.712%, due to a quirk in how the rate is calculated.

Hawaii is one of only four states that taxes healthcare in this way.

Sometimes, doctors can pass along the GET to patients, but not to those with Medicare, Medicaid and TRICARE, according to a spokesman for the Hawaii Physician Shortage Crisis Task Force. This means doctors can make more money by moving their practices to another state.

According to a Grassroot Institute of Hawaii study, exempting medical care from the GET would save doctors and patients more than $200 million a year, which could encourage doctors to stay in Hawaii and possibly attract more doctors to the state. 

In an attempt to alleviate Hawaii’s doctor shortage, the Grassroot Institute recently launched a petition asking lawmakers to exempt medical services from the GET. The petition will be presented to the Legislature before its 2023 legislative session.

Occupational licensing laws

Every state requires doctors to have a license to practice medicine. Licenses are meant to ensure that unqualified people do not practice medicine. But in some cases, licensing laws do more harm than good. 

For example, Hawaii’s licensing laws make it impossible for a doctor with a license from Oregon to practice in Hawaii without getting a license from the state of Hawaii — even if that doctor has a perfect medical record and wants to serve in an area that desperately needs physicians. 

That’s why some other states have created interstate licensing compacts, which allow licensed healthcare workers from member states to practice in other member states. For example, a doctor from Arizona who wants to practice in California could do so without having to spend thousands of dollars in fees or countless hours to receive a new license. 

Compacts exist for physicians, physician assistants, nurses, radiation therapists, emergency medical services workers and other healthcare professionals. Unfortunately, Hawaii is not a member of any of these compacts. Joining any or all of them would make it easier for healthcare workers from other states to practice in Hawaii. 

Hawaii’s high cost of living 

Hawaii’s high cost of living makes it hard for everyone — even doctors and nurses — to afford basic necessities like housing and electricity.  

The median home price in Hawaii is well over $1 million, which makes it hard for recent medical school graduates to afford to live here. Saddled with hundreds of thousands of dollars of debt from medical school, many graduates look elsewhere for their first job. 

Doctors also suffer from Hawaii’s high income taxes — the second highest in the U.S. Compared to states such as Nevada and Florida, which do not have income taxes, Hawaii is a relatively unattractive landing spot for healthcare personnel, despite its natural beauty. 

Conclusion

Hawaii is one of the worst states for doctors to practice, according to the personal finance website WalletHub. Hawaii’s healthcare workers are saying the same thing. 

At a recent forum on the state’s doctor shortage, James Winkler, president and CEO of the Kauai Community Health Alliance, asked: “Why is it hard to retain and recruit [medical personnel]? What are the financial obstacles?” 

“Well,” he answered, “you just can’t pay people enough to live here. It really is that simple.” 

So what can Hawaii do to attract and retain healthcare professionals? Obviously, lowering the cost of living — and the cost of doing business for doctors — would be a good way to do it. 

Specifically, lawmakers could:

>> Exempt medical services from the state GET.

>> Lower the state’s personal income tax rates.

>> Liberalize the state’s medical certificate-of-need laws, which restrict the introduction of new medical facilities and medical services.

>> Let certified medical personnel from other states practice in Hawaii without having to spend time and money to obtain a Hawaii occupational license.

>> Reduce land-use and zoning regulations to enable more homebuilding, which would make housing more plentiful and affordable.

These and many other actions are critical to eliminating Hawaii’s acute shortage of doctors and medical personnel. The longer they are postponed, the longer will Hawaii have to endure its healthcare crisis.

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PETITION: Exempt medical services from Hawaii's excise tax!

To the Hawaii Legislature:

Hawaii families face skyrocketing healthcare costs and a shortage of doctors. Exempting medical services from Hawaii’s general excise tax would result in millions of dollars in savings for residents and help bring doctors back.

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