Hawaii is exploring significant reforms to its Medicaid program aimed at enhancing support for primary care providers. This movement comes in response to growing concerns over the financial viability of primary care practices, particularly on the neighbor islands. A recent piece in the Star-Advertiser’s Insight section highlighted proposals from three doctors advocating for increased funding directed towards primary care and the removal of burdensome administrative processes.
The doctors emphasize that current administrative demands substantially inflate overhead costs, thereby reducing the take-home pay of primary care practitioners. This situation is particularly dire in Hawaii, where the cost of living is notably high. Among the challenges cited are stringent prior authorization policies imposed by Medicaid managed care plans, as well as the complex data reporting requirements stemming from the Hawaii Medical Service Association’s (HMSA) “value-based” payment model that has been in place for the past ten years.
These administrative hurdles not only create barriers for healthcare providers but also contribute to rising Medicaid and HMSA premiums for taxpayers. Since the privatization of Medicaid in Hawaii in 1994 and 2009, managed care plans have introduced increasingly complex prior authorization and formulary restrictions. This has led to a decline in the number of doctors willing to accept new Medicaid patients.
According to a report by Physicians for a National Health Program, financing Medicaid through capitated private plans incurs additional administrative costs, estimated to be around 13% of total Medicaid spending. The true figures are likely higher due to insufficient oversight by MedQUEST and lack of complete data reporting from managed care plans. These factors allow plans to obscure substantial administrative costs, misrepresented as “health care.”
Proven Models from Other States
Hawaii could take cues from Connecticut, which privatized its Medicaid program in the 1990s. In 2012, Connecticut removed managed care middlemen from its system and began incentivizing primary care doctors to manage care directly. This shift resulted in an approximate 13% reduction in Medicaid spending attributed to administrative savings. Connecticut allocated 3% of its budget to enhance primary care compensation and introduce community-based support for high-risk patients.
The results were significant; physician participation in Medicaid increased by 33% in the first year, leading to improved access to primary care and a decline in emergency room visits. By 2017, Connecticut was spending 15% less per Medicaid beneficiary than in 2012.
The current structure of Hawaii’s Medicaid managed care system mirrors that of Connecticut’s system in 2012. A detailed study released in September by Physicians for a National Health Program estimates that similar reforms in Hawaii could yield savings ranging from $85 million to $145 million annually.
Proposed Legislative Changes
To further alleviate administrative burdens, the HMSA could consider abandoning its primary care capitation and “value-based” payment approach. A return to a more straightforward fee-for-service model could significantly reduce overhead costs and include compensation for time spent on documentation and care coordination.
The Democratic Party of Hawaii Health Committee has drafted a bill aimed at eliminating the middlemen from the Medicaid program. The proposal aligns with successful strategies employed in Connecticut and is set to be considered during the 2026 legislative session.
Advocates argue that passing this bill would not only bolster primary care in Hawaii but also provide substantial administrative savings. These savings could help the state navigate anticipated cuts in federal Medicaid support expected within the next year, which could otherwise have adverse effects on the overall healthcare system in Hawaii.
Dr. Stephen Kemble, a retired psychiatrist and former member of the now-inactive Hawaii Health Authority, emphasizes the urgency of reforming Hawaii’s Medicaid program. He believes such changes are essential for the sustainability of primary care in the state, ultimately benefitting both healthcare providers and patients alike.
