Hawaii doctors are poised to get paid more for treating Medicaid patients after state lawmakers inserted $60 million into the state biennium budget to boost reimbursement rates for the government insurance plan that primarily covers low-income and disabled residents.

Lawmakers hope the higher reimbursement rates will improve access to care for residents who often struggle to find doctors willing to take their Medicaid health insurance, while also helping to retain and attract doctors to Hawaii where there are shortages of primary-care physicians and specialists.

“It is a win for Hawaii’s physicians, as well as one-third of Hawaii’s population that is on Medicaid,” said Rep. John Mizuno, who chairs the House Committee on Human Services.

Mizuno, as well as Sen. Joy San Buenaventura, who chairs the Senate Committee on Health and Human Serv­ices, introduced bills during the legislative session to boost Medicaid reimbursements. While those measures didn’t pass, the funding made it into the budget bill, which gained final approval Thursday as the session came to a close.

Lawmakers allocated $30 million in state funds for the 2024 fiscal year, which begins July 1. That funding is expected to be supplemented by $43 million in federal funds. However, the state Department of Human Services still needs to get federal approval to increase the reimbursement rates and said it’s currently targeting a Jan. 1 start date.

Another $73 million in state and federal matching funds is budgeted for the 2025 fiscal year.

After that, funding for higher Medicaid reimbursement rates is uncertain. But Mizuno (D, Kamehameha Heights-Kalihi Valley) said that now that the funding is in the budget, it’s likely to carry over every fiscal year.

“Now, if we do hit a recession and times are hard, hard things will have to be done and I don’t know if this will fall off the table,” he said.

Likewise, San Buenaventura (D, Puna) said future funding for the higher rates could be dependent upon state Council on Revenues tax revenue projections.

In Hawaii, the vast majority of Medicaid recipients are covered under managed-care plans, which are offered by nonprofit insurers AlohaCare, Hawaii Medical Service Association and Kaiser Permanente, as well as two for-profit health insurers, UnitedHealthcare and Wellcare. The insurance companies are provided with a fixed upfront payment for each member and given some discretion in how much they reimburse providers for services.

Under the planned changes, the minimum reimbursement rates for a long list of medical services and procedures would be increased to Medicare rates, which pay significantly more.

In Hawaii, Medicaid reimburses providers at just 62% of the Medicare rates for most services, according to the Kaiser Family Foundation, while private insurance pays significantly more than Medicare.

Hawaii already reimburses some primary-care services at Medicaid rates, but the changes will broadly match the rates for professional services, according to DHS, making Hawaii the only state to do so.

Hawaii has a shortage of about 750 physicians, according to the health care industry, and doctors have cited the high cost of living coupled with low reimbursement rates as reasons.

The rate increases have the support of Gov. Josh Green’s administration and attracted support this year from Hawaii’s hospitals, health insurers and doctors.

Top officials with the University of Hawaii’s John A. Burns School of Medicine said in legislative testimony that increasing Medicaid rates would be a “meaningful step toward addressing long standing health inequities that exist in this state.”

Dr. Jonathan-James Eno told lawmakers that he moved home to Maui to help provide specialty care to the underserved region.

“I maintain a strong commitment and obligation to treating our Medicaid and Medicare patients, however with half of our state’s insured population either on Medicaid or Medicare, it has become increasingly difficult to sustain a private practice,” he said in written testimony urging the Legislature to increase Medicaid rates.

Dr. Edward Gutteling, who works at Hilo and Keaau urgent care clinics, submitted similar testimony, saying the current Medicaid rates are not economically viable for a nonsubsidized practice and were “contributing to the alarming and accelerating loss of available care for the most vulnerable and least healthy segment of our population.”

Another bill that doctors were hoping would pass, Senate Bill 1035, failed this session. The measure would have exempted medical services provided to patients covered by Medicaid, Medicare and TRICARE, which provides health plans for military members, from the general excise tax.