Honolulu, Hawaiʻi – Today, the Legislature passed a bill to provide relief to the healthcare system in Hawaiʻi.
Senate Bill 1035 SD2 HD1 CD1, introduced by Senator Lorraine R. Inouye (Senate District 1, Hilo, Paukaʻa, Papaikou, Pepeʻekeo), exempts hospitals, infirmaries, medical clinics, health care facilities, pharmacies, and medical and dental providers from General Excise Tax (GET) on goods or services that are reimbursed through Medicaid, Medicare, or TRICARE. If approved by the Governor, this law will go into effect on January 1, 2026.
Under current law, there is incongruity in the way medical services are treated with regard to GET. Only medical services rendered at a nonprofit hospital, infirmary, or sanitarium are exempt from GET, but services rendered by individual or group practices or clinics are fully taxable. Government health programs such as Medicare, Medicaid, and TRICARE, do not compensate for the tax differential, which requires some providers to cover added costs.
“At the behest of my constituents from Hilo who are local medical practitioners, I proudly introduced Senate Bill 1035 to address the issue of unsustainable taxation on healthcare services in Hawaiʻi, particularly impacting underserved populations covered by Medicare, Medicaid, and Tricare,” said Senator Inouye. “With a dwindling number of providers able to accept these essential insurances, the bill aims to relieve financial burdens and stimulate economic growth by exempting healthcare and dental services from the General Excise Tax. This measure especially benefits rural healthcare providers and patients, who often face challenges in accessing quality care due to limited resources and funding. Additionally, SB1035 promotes equity and access to healthcare, strengthens our healthcare infrastructure, and ensures compliance with federal regulations. With endorsement from over one-hundred and fifty-five healthcare professionals, I could not be more thrilled that SB1035 has passed the Legislature – this transformative bill will enact meaningful change in our healthcare system.”
The State already faces a shortage of nearly eight-hundred physicians, and a recent survey of physicians by the John A. Burns School of Medicine found that the elimination of GET on medical services could be an effective means of recruiting and maintaining more physicians.
“We have not passed a GE tax exemption bill ever since I have been in office and thus, the passage of SB1035 to benefit medical providers who care for our kūpuna and ALICE families, is a momentous occasion,” said Senate Committee on Health and Human Services Chair Senator Joy San Buenaventura (Senate District 2, Puna). “Ever since Senator Inouye brought this bill to my attention as Health and Human Services Chair , I have championed it. Unlike store owners who are allowed to pass on General Excise Tax to consumers, the federal government makes it illegal for medical providers of Medicare, Medicaid, and Tricare services to pass on General Excise Tax to their patients. Thus, by requiring these medical providers to pay General Excise Tax, we are actually dismissing them by increasing their costs. With this bill’s passage, we remove a major disincentive in servicing the underserved community and hope we can prevent the further loss of physicians, dentists and other medical providers, and save the health industry approximately $74 million per year.”
“For the medical community in Hawaiʻi, May 1, 2024 will be marked as an historic day. Today, we see the passing of SB1035, which brings crucial tax equity to Hawaiʻi’s independent medical providers,” said Hawaiʻi Medical Association president, Elizabeth Ann Ignacio, MD. “This legislation returns fairness to the taxation of medical practices, allowing more physicians to work in Hawaiʻi and increasing access to care for Hawaiʻi’s most vulnerable populations. The members of the Hawaiʻi Medical Association thank our government leaders for their foresight in passing this important legislation; this is a critical step in creating the medical infrastructure needed for a healthier Hawaiʻi.”
Senate Bill 1035 now advances to the Governor’s desk for consideration. ###
