Exploring the Factors Driving Medical Inflation in Hawaii

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A part or portion of a newspaper or periodical publication. Hawaii’s aging population will soon create a fiscal hole because there will be too many older people and not enough younger ones to pay taxes. But policymakers are already discussing solutions, including raising the minimum wage and expanding home ownership options.


Hawaii residents are fortunate to have some of the lowest healthcare costs in the United States, thanks to the state’s requirement that all employers provide health insurance for their employees. The Aloha state also boasts some of the lowest deductibles and copays, with average employee contributions to premiums amounting to less than half the national average. However, rising medical inflation is a concern for both consumers and providers. It can lead to a higher operational healthcare fee for providers, which may cause them to cut back on services or staff or invest less in new technology and infrastructure. Moreover, it can also impact patient satisfaction and outcomes by deterring them from seeking necessary care, especially for chronic conditions. For consumers, increased inflation can mean they’ll have to spend more on healthcare, which can be challenging for lower-income households. Rising costs may make it difficult for them to travel or take time off from work to participate in clinical trials, vital for advancing treatment and cures.


Before the Affordable Care Act took effect, healthcare in Hawaii generally followed expectations. When you went to the doctor, they would talk with you, examine you, make at least a provisional diagnosis, and provide you with a plan for further testing and treatment. Today, however, you’ll likely encounter longer wait times and have to go out of your way to get the care you need. The reason? Medical worker wage increases have outpaced inflation and are pushing up prices, even if you don’t see an increase in your health insurance premium. Another factor contributing to Hawaii’s physician shortage is a state-level tax incentivizing medical professionals to leave the island for better jobs elsewhere. A 2020 study found that exempting for-profit healthcare providers from the general excise tax would save about $200.3 million. That equals about $5,275 per for-profit medical services worker in the state. This would generate an estimated 4,000 new suppliers, induced jobs, and $1.4 billion in additional economic activity.


In Hawaii, healthcare costs drive household spending but also affect local economies. Because of its geographic isolation and heavy reliance on tourism, Hawaii has a unique economy that faces challenges to economic sustainability and health equity. While prices for non-COVID-19 related health services have declined from their peak in December, the state’s healthcare inflation remains elevated. This is partly because doctors’ fees are tied to capitation rates, which factor in additional overhead not present under fee-for-service billing and because labor prices continue to increase. Health insurers typically sign one- to three-year contracts with medical providers that assure lower patient costs and predictable income for providers. These contracts limit medical inflation to a few percentage points of the overall consumer price index, which is influenced by other sectors in the economy. In a study by WalletHub, Hawaii performed well in most categories, including the lowest percentage of uninsured children and the highest rate of adults with affordable health coverage. Its performance was bolstered by its 1974 law requiring employers to provide health insurance for all employees and the federal Medicaid rules ensuring comprehensive benefits.

Consumer Behavior

Consumer behavior studies individuals, groups and organizations and all activities associated with selecting, purchasing, using, and disposing products or services to satisfy their needs and wants. While rational considerations may play a role in buying decisions, emotions and desires can often have an even greater impact. People in the same social class tend to exhibit similar buying behaviors. However, individual factors such as age, gender, occupation, education, religious and ethnic background, and sexual orientation may also influence purchasing behavior. Consumers are already feeling the squeeze of rising medical costs. The co-payments and deductibles of new insurance plans are making it harder to make ends meet. This could drive consumers to forgo or delay needed care, resulting in worse health and financial outcomes. Fortunately, there are ways to help mitigate these higher prices. The first step is to empower the Hawaii Health Authority to fulfill its statutory mission, which includes lowering overall medical inflation by reducing insurance company profits and returning fee-for-service revenue for doctors. If the Governor backs this proposal, Hawaii can lead in cost-effective universal health care.


Before the Affordable Care Act (ACA), health insurance in Hawaii largely lived up to expectations. When you sat down with your doctor, they would listen and examine you, give you at least a provisional diagnosis, and formulate a plan to address it. The result was that medical costs generally matched or surpassed the cost of living but were much lower than in other parts of the country. Then came the ACA, which made it illegal for large businesses not to provide employees with healthcare coverage. This pushed healthcare costs up nationally and increased the number of insured people. As a result, Hawaii’s average employee contribution to premiums and deductibles was much lower than the national average.

However, as Hawaii’s population ages, the state faces a fiscal cliff. Younger people are moving away and won’t be around to generate the tax revenue needed to support their elders. That’s why it’s so important for the state to invest in its future workforce by continuing its successful healthcare system. This will incentivize more people to move here, creating a better economic environment that attracts more healthcare jobs.

Austin K
Austin Khttps://www.megri.com/
I'm Austin K., a passionate writer exploring the world of News, Technology, and Travel. My curiosity drives me to delve into the latest headlines, the cutting-edge advancements in tech, and the most breathtaking travel destinations. And yes, you'll often find me with a Starbucks in hand, fueling my adventures through the written word

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