 talking tax with Tom, Tom Yamachika of the Hawaii Facts Foundation. Today we're going to talk about the physician shortage. I'm Jay Fidel. This is Sinclair Kauai and Scott Grosskreutz. Did I get that right? Yeah, I'm making a wild assumption. He's a doctor. Yeah, he's actually a radiologist and he joins us from Hilo, Hawaii today. So if he's going to help talk about our physician crisis and what we can do about it. Okay, well, we have a physician crisis. I wanted to say to start that a healthy patient depends on a healthy doctor and a healthy doctor depends on a healthy tax system. How do you like that? That's my words of wisdom for the day. So let's jump in, Tom. Let me ask you, do we have a healthy tax environment for doctors? Well, we don't. And let's put up a graph that shows why. The University of Hawaii had compiled some statistics about supply and demand for physicians in our fair state. And as you can see, the demand keeps going up and up and up and up and up. And the supply either is stagnant or goes in fits and starts and then starts trending downward and leading to an ever widening gap between physician supply and physician demand. And you know what that means, right? It means that when you want a doctor, you can't get one. Now, the trend is disturbing because to the extent there is a trend, it means that this is going to get worse. We know it's been getting worse for a long time. And I can remember, well, back in the 80s and 90s, when at one point there were no OBGYNs in Kauai, none, zero. And they said the reason was malpractice cases. But I'm sure it was more than that. And now it's that and much more. So Scott, what's your input on this? You observe it. You see it happening. Why is this happening? What are the current vectors? Well, Jen, practicing in Hawaii now for 35 years. And as you say, it's been a long-term crisis that's or shortage. And now it actually is becoming a healthcare crisis. So we've got shortages and positions as high as 1,000 physicians. We also don't have nearly enough APRNs and PAs. And to make things more challenging, we have about a quarter of the physicians in the state of Hawaii are past retirement age at age 65. Here on the big island, a third of us, myself included our past retirement age. And so we're relying on a lot of older physicians to keep the population cared for because we're having a great deal of difficulty recruiting and retaining new physicians out of training. And that's just a huge concern. It's a concern to the point where the president of the Health Care Association, Hawaii, said that we're having trouble staffing hospitals over the last several weeks and asked for emergency proclamation. Governor Ige granted a waiver for in-state licensing requirements for nursing and there was an immediate peril to public health. Our congressional delegation, especially a representative case and Senator Schatz have pointed out how access to care on the outer islands is really critical. Now the good news is that in Hawaii we have actually the best healthcare outcomes in the nation in recent years, which is wonderful. And that's due to the Prepaid Health Care Act, which Hawaii was a pioneer of and making sure people had insurance. And the others we just have a very good group of local providers, docs, nurses, APRNs that are caring for people. And once we lose those individuals, I think we're really going to be in trouble. But where Hawaii is kind of falling back, I think is rank number 31 right now in healthcare access, meaning when you need a physician or a healthcare provider, you can see that person. And what's going to happen, especially on the outer islands where there's far fewer providers than there are in Oahu, is that we're among the worst in the country, you know, for access to healthcare. There was a recent study of the 3,000 counties in the United States. And of the 3,000 counties, the big island had the third worst shortage, Maui had the fifth worst shortage, and Kauai had the 13th worst shortage of primary care physicians in America. So that just kind of shows you that relatively speaking now we've got a real problem on our hands. Well, just take a moment and delve into the individual doctor situation. Okay, what makes a doctor not want to practice? What makes the doctor want to leave for greener pastors elsewhere? And, you know, be part of the drain? Well, it probably depends on where that provider is in the course of their career. So usually these days, by the time you finish up with college, and medical school, and internship, and residency, and often a fellowship, you're in your early thirties, your debt indebtedness for educational loans is often, you know, a quarter million dollars or more, often it's as high as half a million dollars. And so if you're going to be moving to Hawaii, because you've been trained on the mainland, and you're coming here, you basically are looking at, can you afford to buy a house or pay your medical school bills? And, you know, it's kind of almost like an either or, and you certainly don't have enough money left over usually to start a private practice, which can, you know, cost, as you can imagine hundreds of thousands of dollars to get the facility and, you know, get it to hire your staff and everything like that. So for younger providers, it's really important that we train as many people as we can locally, because local people are much more likely to stay in practice in the long term in Hawaii, and that we enable them to remain financially viable during the early years in the practice when we have these heavy debt burdens to pay off. For positions who are in the mid-career or, you know, getting older, the real challenge is just staying financially viable in the state of Hawaii. So there's only two states in the US that tax patients for their healthcare needs. So one is New Mexico and the other is Hawaii, and that often has a huge impact on patients and their families say you develop renal failure and require dialysis, or perhaps your child develops leukemia, and you're looking at, you know, hundreds of thousands of dollars of healthcare costs. If you apply, you know, 4.7, you know, get with a county surcharge on top of that, you know, you could be looking at tens of thousands of dollars in state taxes, you know, for being ill or, you know, having a member of your family ill. And obviously, if you've got a significant medical problem, you're usually unable to work and pay those debts, you know. So, you know, that's a problem. Hawaii is the only American state that taxes Medicare, Medicaid and tricare. And for for Medicare, as you know, what's tricare? What's tricare? The insurance company for folks in the military. And they're their dependents. Okay, sorry. But so we have about 20% of our population J is on Medicare and about 30% is is in Medicaid. So for Medicaid, you know, we all earn that benefit by paying, you know, federal Medicaid payroll taxes or Medicare payroll taxes. So really, what Hawaii taxes Medicare benefits, what you're doing is it's a state tax on a federal tax. And one thing that that's a problem is the only state to tax Medicare, Medicaid and Medicare is that usually those those taxes cannot be passed on, you know, if you've got to get tax on a loaf of bread, you know, the the the bakery is going to pass that on to the consumer. But Medicare policies prohibit healthcare providers from passing these state taxes on to their healthcare. And we usually don't pass the get on to Medicaid patients because they can't afford it. So basically what's happening is healthcare providers are paying their patients get tax for half of our panels, half of our patient population. And in the mainland, you know, a lot of times it's folks are, you know, they have a challenge, you know, trying to take care of Medicaid and Medicare patients, because usually with Medicare, you kind of break evil with Medicaid, you usually lose money. And so in Hawaii, if you take care of Medicare and Medicaid patients, and then you're breaking even or losing money, you're still paying the GE tax and your gross income. So you're losing money caring for patients. And when you're in a position where you're losing money, caring for half the patients, you know, that in your in your panel, that makes it very hard for clinics to stay viable. There's the largest urgent care and primary care clinic on the North Shore of Kauai, Halea Medical Clinic, that's that's on the verge of going bankrupt, according to their CEO, they're losing $40 to $50,000 a month. And they're only keeping their head above water because of generous donors in the community right now, we have outpatient surgery, community surgery clinic in Hilo that's that also is been on the front page of the paper, because they may have to close. We're seeing a lot of physicians, unfortunately, close their practices and leave. There was one recent access to health care survey performed by the Hawaii Rural Health Association, when they queried providers, they said that up to half the physicians in the state were thinking about, you know, quitting practice, leaving the state or retiring. So it's, it's obviously a serious enough problem that it's it's time that we look at it, I think with with open eyes and try to find some solutions for it. One other thing I want to cover with you is is the the notion of consolidation. You know, there was a time when there were a lot of solo doctors working, you know, themselves out of their own offices. And that was the classic, you know, the classic arrangement. And that's not so much the case anymore, because doctors have gravitated into hospitals and larger structures. Why? And is that help or hurt? Well, let me let me kind of jump in here. There's one feature about the GT that hospitals have been taken advantage of. And that is, if you're organized as a tax exempt association, and all the hospitals in this state are, then you get an exemption from the GT on the on the gross amount of fees you get for for healthcare. Now, the same exemption would, at least in theory, apply to any hospital or medical clinic as long as it's not profit. So would it be possible to, you know, use that feature to take advantage of or take advantage of that feature to to help our physician practices stay afloat? I think those are those are excellent points. So, Jay, as you pointed out, it used to be that most physicians, you know, put their shingle up on their office, and they they had their private practices. And that practice model was becoming less common. For the first time last year, the American Medical Association stated that 40 only 49% of providers were in private practice. And hospitals, HMSA, Kaiser, you know, anything that's organization's got a nonprofit status, like Tom points out doesn't have to pay the get. And it was interesting that the president of the Health Care Association of Hawaii recently said that if the get were applied to Hawaii's hospitals to the health care provided in those settings, that many hospitals would have to limit their their services are possibly even closed down. So in effect, the get would be could be a death sentence for our hospitals if we put it on that sector of our health care community. Right, like there was there's actually one example. Recently, there was this hospital that opened up in in EFA on on our island here on Oahu. They were not a a nonprofit. And and they kind of spiraled down into bankruptcy. Yeah, so you can you can see that if that that's that's a case in point that if the hospitals were hit with the and the physicians that and nurses and everyone else that they employed that they were hit with the GT tax, they probably could not remain in business. The GT tax on the private sector is probably the equivalent of about a 13 to 15 percent, you know, tax because it's on your gross income and makes no no allowance for the fact that often you're providing charity care or you're breaking even, you know, taking care of folks on Medicare and Medicaid and things like that. So yeah, that's a real problem now as especially on the neighbor islands where the health care shortages are the worst. I mean, it was determined that a year ago about the big island had 53 percent shortage of physicians and Maui, I believe was 43 percent shortage. And then you have a situation where you have people leaving private practice. You know, sometimes the hospitals will hire these folks, but sometimes individuals are just turning they're doing tele radiology for the mainland, or they're you know, they're leaving the state to practice elsewhere because they can't make the practices work. And the real irony is that as the number of people in private practice continues to decrease, at some point, there will be no health care providers left to tax with the get. You know, so the get tax, if it has the intended effect, you know, which almost seems like, you know, to not have people in private practice, once those individuals leave, there will be no revenue from the state of Hawaii, you know, from taxing health care. Right after this show, I'm going to send my primary some roses. So, Tom, you know, what can we do about this? I know there are many, many vectors and factors that Scott's talking about historically and currently, but what can we do about this, for example, in the next session of the legislature to make it kinder and gentler for the medical profession in Hawaii? Well, the candidates who have been running for higher office have, you know, made noises about enacting some kind of exemption for food and or health care. I think they're going to kind of get a sticker shock when they find out how much this actually costs, because, you know, the GT does make a whole lot of money at a, you know, relatively low nominal rate. I mean, 4% is not what you see in sales tax states on the mainland, you know, in Nevada, California, like it's 8%, 9%. We're at 4%, but our tax brings in a hell of a lot more money than the sales tax states do, even with an 8% or 9% rate, you know, if you look at that. And that's, and the reason is because it's so broad and it reaches so many things and it even reaches, you know, things in overhead, like any business may have to pay overhead, like, you know, power, water, basic necessities, supplies, the GT is all there to grab some of that. You know, whatever you pay, as an end user, you need to pay 4% on whatever you pay as a reseller, with, you know, with few exceptions, the GT takes a piece of that too. One of the exceptions is for Rx drugs, prescription drugs and prosthetic devices, but that doesn't help you if all you need is aspirin. Is Joe Biden's Inflation Reduction Act and the drug pollution going to help? Well, I'm sure it'll help on the base prices, but it doesn't help the tax. I mean, because it's a state tax and that's a federal program. You know, we've said this before in the state, which is primarily blue, you know, in democratic in both ways, capital D, small D. You know, it's just remarkable that we have a gross excise tax that is so regressive and that hurts the little people so much, including medicine. So, you know, one thing, one reaction I get from your comments, Scott, is that the medical profession in Hawaii for the benefit of it and for the benefit of all of us needs to have a champion that you're in crisis and you've been in crisis and it's getting worse because, you know, these factors, you know, exacerbate. And so, query, who is the champion? Or if there isn't one, how can there be one? Somebody ought to be out there really doing a job. For example, comes to mind the health department. But, you know, let's be candid. You need a champion to go and lobby and make some noise about this. Yeah, right, Jay. We do have an organization, the Hawaii Physician Shortage Crisis Task Force, kind of a long name, but it kind of lays it out there. We also have APRN and nurse members. And so, you know, we're a group of about 50 folks. We've also been in practice for many years trying to raise awareness of these issues. We, it's not like that I think that many of our lawmakers aren't familiar with these problems, but there's certainly, if the more you learn about this, the more it seems that there's a real need to make some changes. We did get a bill submitted in the 2020 session. It was SB 2542, which basically provided an exemption from the get tax for services from doctors and APRNs. And that passed the Senate without a single no vote. But when COVID hit, they didn't elect to hear it in the house that year, and it was not reintroduced last year. So it's, I think intellectually people understand that something needs to be done. It just has to be enough of priority. And perhaps the general public needs to kind of also talk to folks during this election cycle about their concerns. And this is a much bigger problem than just how this affects providers. That's actually the small part of it. As your audience will recognize, Hawaii's been losing population now for over half a decade. Last year, we lost over 10,000 people. And that is in large part due to the cost of many things of food, of healthcare, of housing. When it comes to food, like Tom pointed out, it gets a pyramid tax. If you raise coffee and you sell your beans to a coffee wholesaler, they pay the get, then they sell it to somebody who roast and package the beans, and they pay the get, and then you sell it to Safeway. And Safeway pays the get, and Safeway sells it to you, and then you pay the get on that. But really, if we don't fix this problem, we're going to just see we have a worse access to healthcare. And you can take a look at the Department of Health statistics. The mortality, morbidity rates for all kinds of different conditions are higher than on the neighbor aisles in the Arnawaku. So the death rate from heart attack, and from trauma, and from suicide, and from diabetes, and from asthma, from hepatitis C. You go up and down the list. There's substantially higher death rates from these many disease processes. If you live on Kauai or Maui or the big island compared to Oahu. So it's important that we fix that. And the other thing that I think that sometimes isn't really realized, and Mayor Rock made this comment and a meeting with us a number of months ago, if you don't have a viable healthcare system, it gets to be very difficult to basically try to recruit new industries or businesses in your area to provide good jobs for people. And I think that's really true. There was an AMA study on the national economic output of physicians and a single physician in a community basically results in increased economic aggregate output of over $3 million. And so if we were able to recruit 1,000 physicians, we would have about another $3 billion of aggregate economic activity. We have $17,000 in new jobs. And the increased state and local taxes could be as high as $127 million in just having the necessary healthcare providers that we need to provide care in the community. So I don't think it's an all-some game. I think that if we had a vibrant healthcare system and adequate access to care, it would benefit the state and overall be economically more healthy. Yeah. Well, the ghost of Christmas future is not very encouraging because you have implications all over the community and it's a spiral down. I mean, look, if I can't get access and I get sick and I become a burden, then it costs the state in other ways. Take care of me if I'm bankrupt and what have you. And if new entrants in business don't come here because they don't want to enter a market and they don't want their families entering a market that won't provide adequate healthcare, you have a whole spiral effect. It's not just me and the medical community, it's the state and the medical community. So it's the first community in general. That's right. Because if people are sick, they're not productive. You got to have them well to be productive and you have to have people who know about these diseases and can take care of these folks. But I want to point out that it's not just the gross excise tax. It's much more than that, even from Scott's comments. For example, suppose I went down to Cacaacoa and doubled the triple the size of the medical school right now today. Suppose I supported the tuition there. Suppose I incentivized them, the training of new doctors. Suppose I gave them special incentives to go to the neighbor islands and practice there for a period of years after they graduate, so forth. Suppose I incentivize hospitals. It's a matter of money. If the state puts some money into this, we could alleviate the problem, I think. Well, it's not only money. It's regulation, right? I mean, we have a system requiring certificates of what is it? CPC and certificate of need. Yes, certificate of need. So you need to go through regulation. I mean, healthcare is regulated. And if the regulators don't allow you to put up a clinic or expand an existing clinic, you can't do it. So that's another problem, independent of tax. One thing you alluded to, Scott, is think about reciprocality. So suppose I'm a doctor and I'll pick a state. I'll try to pick a blue state. I'll pick California. And gee, I want to have a little sunshine. So I'm interested in coming out if it's a decent pathway for me. But reciprocality is not so easy, is it? Can I just come out from California and practice in Hawaii? Is there anything we can do to draw doctors and healthcare providers from other states? There could be. During the COVID pandemic, state licensure requirements were waived for doctors, nurses, and other providers just in order to get enough people to help take care of us here in Hawaii. The challenge is that the physician shortage is projected to be as high as 130,000 by about 2030 nationwide. And there's also projections of nurse shortages as high as perhaps even a million. And there's been some studies recently that were published that talked about the entire healthcare community in the US. And people are pretty toasty after COVID. COVID was a huge stress around the system. I mean, we lost some healthcare providers who died. We have others that have had long-haul COVID symptoms and others that are just kind of exhausted from the situation. So you're basically trying to attract more providers from a country where there's not any healthcare providers to attract from. So there are some things that you could do. There's a surprising number of physicians that graduate from medical schools in the US every year. And there's no residency slots for them. So it was a math problem. Somehow the federal government decided to allow more people to be trained in medical school than we have slots for them to complete their education. So we have thousands of licensed physicians that aren't able to complete their training. So Hawaii could step up more residency training programs. You know, the recent bill signed by the governor to increase the number of training slots for medical students and residents. I believe nurses as well. I mean, that's a step in the right direction. But when you finish up with your training, unless there's some system where you're practicing economically viable, you'll probably practice for a few years, perhaps pay off your obligation. And then again, we could be losing people to the mainland. Some of the big picture aspects about practicing Hawaii is that CMS treats Hawaii like a low-cost industrial state, like we're... CMS? CMS. Yeah, CMS, exactly. What is CMS? Center for Medicare and Medicaid Services. So that's the government agency that decides what individuals are going to get paid. And Alaska is kind of like Hawaii, where Alaska has got a population that's very isolated by geography, a lot of remote Indian villages and people on islands and things like that. And so the Alaska congressional delegation said, listen, we're so short of providers for our Medicare patients that we have to do something about that. So they got a bill passed, where basically they increase their payments per what they call RVU, a relative value unit by 50%. So in Alaska, they're making about 1.5 times what you would if you were a healthcare provider and APN or doctor in Hawaii. And so that's a real problem. We've got this very low reimbursement rate. The local payers tend to pay very close to Medicare rates. So there's no cushion like there is in the mainland. We're often private insurance companies pay substantially more. Then you've got very significant pre-authorization requirements, where in effect, every time the physician wants to prescribe a treatment or a diagnostic test or, of course, the therapy, they're kind of second-guessed by, often usually a vendor in some other state who's often not even a physician. And so I wouldn't be surprised if our local healthcare providers are perhaps wasting up to 15% to 20% of their time just trying to fight to get pre-authorizations done. And that's kind of demoralizing for a lot of healthcare providers too. And you go through all these years of training, you know your patient the best, you know current therapy, you know the national guidelines, and yet every time you make a decision about healthcare, you're being second-guessed, and often there's delays in that. Yeah, well it's easy to get inequitable, look what's happening on the mainland about abortion. It becomes inequitable so quickly when you let the government inside those physicians. One other thing I wanted to ask you about was some reference that I made earlier to what happens when there's too much tort litigation. Ergo, the expense of malpractice becomes unaffordable for doctors and so forth. And in this state, we haven't had tort reform as has existed in other states in a long time. What effect does that have? What effect would it have if we did have tort reform? I think it could be beneficial. Texas had a problem where they had a severe shortage of healthcare providers and they enacted tort reform and they substantially improved the number of people that were practicing in their community. So it had a big beneficial effect there. So that would be part of a global fix, Jake, to put tort reform in there with reasonable payments and fair taxation. The state really needs to increase revenue, which what I think is you have a progressive tax on those that hire income brackets. You don't prevent businesses from making a profit in the first place. And really kind of as a result of these various factors we're talking about out of all 50 states, Hawaii is dead last in the availability of providers to accept Medicare patients. And that we're behind all of their 49 states in the District of Columbia. And at a time again where half of our population is on Medicare and Medicaid, you can kind of see that that problem is going to get worse shortly. It looks like we really have to do some reorganization. Nationally, I think we should do some reorganization. We've been having shows with Canadians about the Canadian healthcare system and it strikes me as more equitable. It strikes me as more efficient. And there's access to everybody, which is really a wonderful thing. We haven't learned that yet. We're still fighting that battle. But query, what kind of reform could we do here in Hawaii? How much of that is tax and tax credits to the industry? What can we hear on this discussion, this show, talking tax with Tom? What can we recommend? Well, I think we need to kind of step off the gas pedal when it comes to taxing healthcare. I mean, there should be, I think, a realisation. I think there is a realisation that the problem is real, that the relief is necessary, that the physicians really are caught between a rock and a hard place. The rock being the low reimbursement rate in the hard place being the GET that's put on top of it. And the prohibition against passing it on to the consumer. So, yeah, something's got to give. And I think if we want, as a policy matter, to have docs in our state, we need to do something about this. Well, I put it to government. I've granted that the Trade Association, you're talking about Scott, is helpful. But it is self-interested, at least in the minds of the legislators. And we need champions here. We need the Department of Health, which is a huge juggernaut organisation. It has a huge number of people who are presumably able to do this. We need the governor, and he will be in likelihood a doctor, as you may recall, and hopefully he'll step forward understanding the problem and taking steps. But I think we need an all-hands-on-deck approach, and that includes champions at every level of government. Your final comments, Scott. I appreciate the opportunity to talk about these issues. They're complex, and hopefully this will help educate folks in Hawaii, particularly the general public, about these issues. And again, this is a problem that's just not affecting healthcare providers. It's just affecting the health of our communities, our family members. It's having a negative impact, I think, on the state. And the one thing I would kind of close with here is that the Hawaii Department of Taxation at their website on Tax Facts 98.1, it basically states that, yes, if you're on Medicare, Medicaid or TriCare, you will be assessed the get tax, and your provider will basically elect to pass it on to you. And just a warning for anybody that's starting practice in the state of Hawaii or moving here, you cannot do that. You cannot follow that guidance, because if you do, you'll be investigated by the Office of the Inspector General for Medicare fraud. So I think that's something that we should think about. We should not be promoting actions, I think, that could get folks in hot water. Because if one is investigating for Medicare fraud, that would probably be a career-ending event. And the last thing we could really afford is to lose any more providers. Yeah, true fact. Tom, your last thoughts? No, I think we really do have a problem, and we need to do something about it. If we want to keep our docs, and we want to keep our docs, we've got to do something about it. Our health depends on it. How about this? Our lives depend on it. Okay, you guys, we've got to go now, and me especially, I have to make the call to my florist. Thank you, thank you, Stan. Scott Gross-Kroiz and Tom Yamachika, Talking Tax with Tom. Aloha, you guys.