Honolulu

When the coronavirus pandemic hit in March 2020, the only thing Hawaii had going for it was that it could strictly control who came and went. The Aloha State, however, was ill-prepared to handle the increased burden on its medical system, and authorities used that as an excuse to impose lockdowns on all economic and social activity—to “flatten the curve” and prevent excess demand at local hospitals.

Nineteen...

Medical workers process Covid-19 tests at a hospital in Aiea, Hawaii, Sept. 15.

Photo: Caleb Jones/Associated Press

Honolulu

When the coronavirus pandemic hit in March 2020, the only thing Hawaii had going for it was that it could strictly control who came and went. The Aloha State, however, was ill-prepared to handle the increased burden on its medical system, and authorities used that as an excuse to impose lockdowns on all economic and social activity—to “flatten the curve” and prevent excess demand at local hospitals.

Nineteen months later, some of those lockdown measures are being lifted, but many remain. Covid-19 eventually will morph from a pandemic disease to an endemic one, and presumably Hawaii’s constitutional balance of powers and freedoms will be fully restored. But Hawaii’s healthcare capacity shortage will continue, at least until the state’s political authorities tackle with earnest its multiple causes.

Hawaii has among the fewest hospital beds per capita of any state and the 10th longest emergency-room wait times. For years it has wrestled with a severe doctor shortage and a lack of specialty care in its rural areas. These shortages are the result of decades of high taxes, voluminous regulations and certificate-of-need laws.

Certificate-of-need laws require any investors wishing to build a new medical facility to prove there is a “need” for it. In Hawaii, existing medical facilities are given the chance to argue against any potential new kid on the block. This is like letting Burger King testify on whether the community needs a new McDonald’s. Not surprisingly, existing service providers generally oppose the construction of new facilities.

Since 2006, Hawaii officials have denied 24 certificate-of-need petitions, representing $200 million in private healthcare investment. The denied applications include three medical facilities that would have added 206 beds, increasing hospital capacity by 8%. According to the Mercatus Center, Hawaii would have 14 additional healthcare facilities and $219 less annual per capita healthcare spending if not for its certificate-of-need requirements.

Hawaii isn’t the only state with such requirements. At one time every state but Louisiana had them. But since Congress repealed the federal mandate and funding for them in 1986, their popularity has waned. Thirty-five states and the District of Columbia currently require certificates of need, with many taking steps to liberalize their laws. But Hawaii’s requirements are among the strictest, covering everything from hospital expansions to substance-abuse centers and home healthcare.

Even before the pandemic began, experts estimated the state needed 800 additional doctors and about 2,200 nonphysician healthcare personnel. Hawaii is a high-tax state, making it difficult to attract talented physicians from the mainland. This year the state Legislature considered a bill to increase Hawaii’s personal income-tax rate for those earning more than $200,000 to 16%. The bill didn’t pass, but it set off alarms among many physicians who already had been considering retiring early or leaving the state.

A pyramiding general excise tax adds thousands of dollars to the average doctor’s medical-practice expenses. This tax is especially a problem for private-practice physicians. Under federal law, they can’t pass its costs on to Medicaid or Medicare patients, and have to pay it out of their own pockets. Combined with Hawaii’s already-low Medicare reimbursement rates, the general excise tax provides doctors with a further incentive to leave the state.

If for-profit medical providers were exempted from the general-excise tax, they would save $200.3 million. If that exemption led an additional 820 physicians to set up shop in the state, it would result in an increase of almost 4,000 full-time positions in the industry and $1.4 billion in additional economic activity. Easing Hawaii’s certificate-of-need laws and tax burden wouldn’t fix the state’s healthcare problems overnight, but it would help improve care, cost and access in the long term—and help it be better prepared for the next public health threat.

Mr. Akina is president and CEO of the Grassroot Institute of Hawaii.

Wonder Land: What we needed most from the Government during Covid's two long years were mid-course corrections. Instead politicians chose rigidity, such as Joe Biden's vaccine mandate. Images: AFP via Getty Images Composite: Mark Kelly The Wall Street Journal Interactive Edition