A bill that would provide tax exemptions for medical services provided to low-income Hawaiians garnered some support during a public hearing on Friday.
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The Senate Committee on Health and Human Services approved Senate Bill 1035 unanimously during the meeting. The bill would exempt medical services provided by healthcare providers to patients who receive Medicaid, Medicare, or TRICARE benefits from the general excise tax (GET) beginning on Jan. 1st, 2024.
There is currently an incongruity in the way medical service providers are treated, according to the bill. Medical services rendered at a nonprofit hospital, infirmary, or sanitarium are exempt from the GET, while the same services rendered by individuals, group practices, or clinics are fully taxable. Government programs like Medicare, Medicaid, and TRICARE do not compensate providers for the monetary differences created by the GET, leading to some inconsistency in the economic impact to providers.
Dr. Cindy Pau, who works at a small medical practice in Honolulu, testified in support of the bill.
“To be honest, it really has not been easy,” Pau said. “This really has not been a new concept because Hawaii hospitals and community centers are exempt from GET. However, small medical practices like mine are not. Small medical practices used to make up 60% of Hawaii practices, and now it’s about 30%. And if there’s no small medical practices, there will be no GET left for the state to collect anyway.”
AARP Hawaii Advocacy Director Audrey Suga-Nakagawa said the passage of SB 1035 would provide more access to care for elderly residents.
“Our kupuna are not having full access to the care they need,” Suga-Nakagawa said. “There’s about 279,000 Medicare beneficiaries in the state. So if we can have more physicians who can take care of them that would be really great. We encourage the state to look at all types of incentives and remove barriers so our physicians can flourish and continue the care they provide for our community.”
Esther Smith, who operates a medical clinic in Kealakekua, noted that Hawaii has one of the lowest Medicare acceptance rates in the country.
“So if you would like people to take more Medicare patients, you want them to not be punished as they currently are,” Smith said. “Physicians frequently shy away from the higher concept that it’s a funding problem, but it is. Changing the tax would change things for us into the future. It’s not a grant that can be channeled into special interests or large hospitals. If you remove the tax, it goes to us.”
The Hawaii Provider Shortage Crisis Task Force’s Dr. Scott Grosskreutz also testified in support of SB 1035.
“The main practice killer in private practice with the GET is the taxation on Medicare, Tricare, and Medicaid,” Grosskreutz said. “This bill has got the best potential to keep both primary care doctors, (advanced practice registered nurses), and specialists providing care. I’m just afraid that if we don’t do this, private practice is going to basically die out over the next three to five years. The taxation from the GET from taxing private practice will trend towards zero. And we’ll be stuck in a position where we have a severe crisis.”
SB 1035 now needs to be approved by another committee before being presented to the Senate for a final vote.