By Stephen Kemble, M.D.
Honolulu Star-Advertiser, Dec. 21, 2025
Thanks for the excellent articles in the Star-Advertiserās Dec. 14 Insight section, on proposals to save primary care practices in Hawaii, especially on the neighbor islands. I agree with the three doctors who co-authored the Island Voices piece, āSupport Hawaiiās primary care providers,ā that we need to direct a much higher percentage of health care spending to primary care.
We also need to reduce unnecessary administrative burdens that now result in practice overhead costs that are squeezing primary care take-home pay well below what it costs to live in Hawaii, especially on the neighbor islands. Those unnecessary burdens include abusive prior authorization polices, especially by Medicaid managed care plans, and also detailed data reporting required by HMSAās āvalue-basedā payment policies imposed on primary care over the past decade. Administratively costly payment systems also raise the cost of Medicaid and HMSA premiums for taxpayers and purchasers of insurance.
Hawaii turned Medicaid over to private insurance plans in 1994 and 2009, and the managed care plans added ever-increasing prior authorizations and formulary restrictions, with the result that doctors began to refuse new Medicaid patients. Financing Medicaid through capitated private plans also adds administrative costs of around 13% of total Medicaid spending ā and the real figures are likely higher because poor oversight by MedQUEST, incomplete data reporting from the plans, and use of multiple subcontractor costs reported as āhealth careā enable plans to disguise substantial administrative costs as āhealth care.ā
Removing the middle-men from Medicaid could relieve administrative burdens imposed on primary care practices due to abusive prior authorization policies and also free up money from the state budget to improve payment and support for primary care.
Like Hawaii, Connecticut privatized Medicaid in the 1990s, but in 2012 that state fired the managed care middle-men and started paying primary care doctors extra to manage care instead of expecting insurance companies to do that. Connecticutās Medicaid spending promptly fell by about 13% due to administrative savings. Connecticut used 3% of the budget to improve primary care pay and add community-based support for high-risk patients. Improved pay and relief from burdensome managed care restrictions resulted in 33% improvement in physician participation in Medicaid from the first year. Increased access to primary care led to decreasing emergency room and hospital spending, and by five years out, Connecticut was spending 15% less per Medicaid beneficiary than in 2012.
Hawaiiās current Medicaid managed care system is quite similar to that of Connecticut in 2012, and a detailed study on Medicaid managed care by Physicians for a National Health Program in September estimates savings for Hawaii from similar reforms would be in the range of $85 million to $145 million per year.
Further reduction in both practice overhead for primary care and in the administrative cost of health insurance could be achieved if HMSA were to abandon primary care capitation and āvalue-basedā payment with its high administrative overhead, and return to a simpler and less costly form of fee-for-service that includes payment for time required for documentation and care coordination.
The Democratic Party of Hawaii Health Committee has drafted a bill to remove the middle-men from Hawaiiās Medicaid program, following the policies that have proven so successful for Connecticut. Passing the bill in the 2026 legislative session would go a long way toward helping save primary care in Hawaii. Large administrative savings would also enable the state of Hawaii to weather impending cuts in federal support for Medicaid a year from now that will otherwise have devastating effects on our entire health care system.
Dr. Stephen Kemble, a retired psychiatrist, served on the now-inactive Hawaii Health Authority, charged with designing a universal health care system for Hawaii residents. He is a national board member of Physicians for a National Health Program.