A bill that would exempt medical providers from the state’s general excise tax for treating Medicare, Medicaid and TRICARE patients will be voted on today in the Senate.
If approved, Senate Bill 1035 will cross over to the House for further review.
The bill is one of the last measures still alive in the House or Senate that would exempt medical providers from the GET.
“I feel comfortable that it’ll pass out of the Senate,” said Sen. Lorraine Inouye, who introduced the bill. “Hopefully, it’ll have a good reception in the House as well.”
The GET for Hawaii County is a 4.712% tax on nearly all business transactions and purchases.
“Currently, medical services provided at a nonprofit hospital, infirmary or sanitarium are exempt from the general excise tax,” said Maui Sen. Gilbert Keith-Agaran, who co-introduced the bill. “But those same services are fully taxable if provided by individual or group practices or clinics.”
With more than 50% of the state’s population covered by Medicare, Medicaid and TRICARE, providers view the exemption as a way to help alleviate the state’s physician shortage.
The Hawaii Physician Workforce Assessment estimated that in 2023 Hawaii would need 776 full-time physicians, with primary care being the greatest area of demand.
“Hawaii is the only state that penalizes providers for caring for the elderly, economically disadvantaged and veterans,” said Dr. Scott Grosskreutz, leader of the Hawaii Provider Shortage Crisis Task Force. “If this bill is killed, it will likely be the last straw for many providers.”
An amendment to the bill was added by the Senate committees on Ways and Means and Commerce and Consumer Protection, with a sunset clause ending the GET exemption on Jan. 1, 2026, even if passed.
“We hope the two-year sunset clause is reconsidered,” Grosskreutz said. “GET reform should help local medical practices stay solvent. Many would hire more doctors, nurses and APRNs to care for patients with federal insurance coverage. If SB 1035 sunsets, then these new hires would likely have to be released when revenues again fall.”
Inouye said the amendment is mainly a placeholder to test how much revenue from the general fund will be needed for the exemption.
“When it comes to that particular sunset date, hopefully we’ll pass another bill to extend the sunset period,” she said. “When we get closer, we’ll create another bill and see what the economic impact would be for the next couple of years when we give them the exemptions.”
But Grosskreutz said providers would be hesitant to hire if the exemptions can expire.
“You have to know what your income and revenue stream is going to be before you make long-term decisions about hiring personnel,” he said. “If people do hire new providers to care for Medicare, Medicaid and TRICARE patients, when the bill sunsets, they won’t have the revenue to pay them.”
The Senate’s companion bill, House Bill 662, also exempted medical providers treating Medicare, Medicaid and TRICARE patients, but the House Committee on Finance declined to hear the bill, ultimately killing it.
Committee chair Maui Rep. Kyle Yamashita did not respond to requests for comment prior to publication regarding the reason for not hearing the bill.
Back in 2020, a similar GET exemption measure was attempted, but also failed to pass the House Committee on Finance, with many citing the COVID-19 pandemic as a reason the bill wasn’t heard.
Inouye said the situation is not uncommon when a similar bill is moving through the House or Senate.
“If there is a bill that we didn’t hear in the Senate, but we know the House bill is moving it along, we normally say, okay, the House passed the bill, so we don’t need to hear the Senate version,” she said. “That applies to all of the committees, and it’s not always because they oppose it.”
The state had a budget surplus of roughly $2 billion for the 2023 Fiscal Year, with $831 million in additional reserves, leading many providers to believe if an exemption fails now, it may never get through.
“With a reported multibillion (dollar) budget surplus last year, now is obviously the time to stop GET taxation of Medicare, Medicaid and TRICARE,” Grosskreutz said. “Hawaii’s health care provider community is appreciative that the committees that have heard the GET measures so far have unanimously voted to pass them.”
Several other House and Senate bills related to GET exemptions have stalled, including House Bill 240 exempting physicians and advanced practice registered nurses acting as primary care providers from the GET, along with House Bills 688, 887 and Senate Bill 102, which exempted all medical services from the GET.
Email Grant Phillips at gphillips@hawaiitribune-herald.com.
