Lessons from Hawaii's Health Care System

By Lee, Sam | State Legislatures, July 1994 | Go to article overview

Lessons from Hawaii's Health Care System


Lee, Sam, State Legislatures


The people of Hawaii are the healthiest in the United States. We've had almost universal care for a hundred years. Before that, chiefs and royalty provided health care for the common people.

The Hawaii health system is characterized by government activism, employer paternalism, universal access, group and salaried medical practice, capitative payment, outpatient focus, and preventive and primary medicine.

When Hawaii became a kingdom in the 18th century, kuhunas (healers) cared for people at the direction of the chiefs. Later, two queens built hospitals that are still in operation. In the 19th century, white planters hired doctors and built small hospitals to keep their workers healthy and productive. In the '40s, such benefits were written into collective bargaining agreements with the rise of unions and health insurance.

Hawaii has become the healthiest state through preventive and primary care at the lowest possible cost--9 percent of GDP in Hawaii--compared with 10 percent in Canada and 14 percent nationally in the United States.

We have the same number of hospital employees (4.8) per patient as nationally but only 2.9 hospital beds per 1,000 vs. 4.9 nationally. Our utilization rate is only 84 per 1,000 vs. 136 nationally.

Can Hawaii be a model for the nation, or is Hawaii unique and irrelevant?

Hawaii is unique. But it can also be a model. It has been a kingdom, a republic, a territory and now a state. Its people are exceedingly diverse. No group is in the majority. Each one is a minority.

The current health system dates from the Prepaid Health Care Act of 1974 (PHCA) that mandated employer health insurance for employees (but not dependents). The PHCA was enacted inanticipation that the Nixon-proposed national health system mandating employer insurance would be passed by Congress. It wasn't.

Standard Oil of California strongly opposed the Hawaii law and helped push through the federal Employee Retirement Income and Security Act (ERISA), prohibiting state regulation of self-insured employers. Standard Oil then took the state of Hawaii all the way to the U.S. Supreme Court, which struck down the Hawaii health act.

If the Court had had the last word, the Hawaiian health system would have been strangled in the cradle. Fortunately, our congressional delegation fought for and finally obtained an exemption from ERISA for the PHCA in 1982.

During the '70s and '80s, Hawaii underwent rapid economic development and population growth, fueled by capital and newcomers from the mainland. Plantations were closing, and the colonial agricultural system began its long decline to demise. Hotels and resorts sprang up everywhere.

These dramatic changes sorely tested the islands' tradition of aloha (love) and ohana (family). The Prepaid Health Care Act was passed in 1974 to preserve a part of island life, but unintentionally it served to anticipate a national problem of crisis proportions. …

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