The author is a regular contributor to Voices. He lives in Goleta.
A number of years ago, I wrote an op-ed piece on this page regarding the monopolistic practices of Cottage Hospital. I explained how Cottage Hospital pursued a deliberate long-term strategy to acquire every hospital in Santa Barbara/Goleta and Santa Ynez, the consequences of which are now being felt by the residents of our community.
Of all the columns I have written for this paper, that piece received by far the greatest reaction from readers. I heard from doctors, employees and patients. Almost everyone had a story to tell, which didn’t reflect well upon the hospital and the high cost of health care in our area.
Although I always suspected that Cottage Hospital was partly responsible for the sky-high prices we are paying for medical care and health insurance in Santa Barbara, I didn’t have proof until recently. During the open enrollment period, I checked the Covered California website to see what we in Santa Barbara are paying for Obamacare and compared it to a roughly comparable policy in the Los Angeles/Santa Monica area. What I found shocked me.
I took the cheapest health insurance policy for a 60-year-old couple in Santa Barbara and compared its premium to the cheapest policy I could find in the Los Angeles area. I also assumed this couple makes $102,000 a year, which by no means would be considered wealthy in our high-cost community. At this income level, they would be ineligible for any federal and/or state subsidies.
This couple would pay $1,700 a month or $20,400 a year, for an insurance policy with a family deductible of $13,800. The policy also comes with a restricted network of doctors and a limited formulary which excludes many expensive drugs for very serious diseases. Consequently, this married couple would have to spend at minimum $34,000 from their own pocket each year if they got sick, or 34% of their income. Considering how expensive it is to live here, an expense of this magnitude would no doubt be a disaster for them.
Now let’s take a look at a similar policy in Los Angeles. The least expensive policy in L.A. would cost this couple $1,150 a month, or $13,800 a year. In other words, a Santa Barbara resident would pay 48% more because they live in Santa Barbara rather than Los Angeles. If that weren’t bad enough, the L.A. couple’s deductible is $12,600, or $1,200 less than the roughly equivalent policy in Santa Barbara, with the first three doctor visits covered before the deductible.
At this point, you have to ask yourself why would health insurance cost more in Santa Barbara if the cost of living is just as high in Los Angeles. In fact, a house in Santa Monica is twice as expensive as a comparable house in Santa Barbara. So, if it costs twice as much to buy a house there, why in the heck would it cost almost 50% more to purchase health insurance in our town?
One answer must be that the Santa Barbara region has only one hospital, while Los Angeles has many hospitals, all competing with one another for patients. In our town, Cottage Hospital is a monopoly and uses this advantage to force insurance companies to pay exorbitant rates, whereas in L.A., none of the hospitals have this type of leverage.
Recently, Anthem Blue Cross kicked out Cottage from its network when they couldn’t arrive at an agreement on rates with the hospital; however, Anthem quickly capitulated because there was no way the company could survive in this market without a hospital in its network. Although it’s not transparent to those who live here, their premiums will undoubtedly be higher because of the monopoly Cottage enjoys in our community.
It’s not just Obamacare subscribers affected by these high prices; every employer or business in Santa Barbara will also pay much higher premiums for its employees. This cost makes it very challenging for any company to locate here.
Finally, Cottage Hospital is a nonprofit in name only, as it has benefited greatly from this unique advantage. In 2017, the last year a Form 990 was publicly available, the hospital’s combined total revenues over expenses were $170 million, and its top executive took home $1.2 million in salary. At least six other executives made over $400,000 a year. Perhaps most outrageously, the hospital agreed to pay its CEO $15.7 million in deferred salary.
I hope by shining a light on the problem of living in a community with a hospital monopoly, the readers don’t draw the wrong conclusion. The answer is not to adopt a single-payer health care system as envisioned by Bernie Sanders, Elizabeth Warren or the governor of California. Why would a government monopoly of health care be any better than the monopoly we have now? Instead of high prices, a government takeover would routinely deny services and drugs to force lower prices.
Either situation is detrimental, although I would rather have health care be too expensive than scarce or in short supply. Whether it’s a government or private company monopoly, it’s the consumers who always get shortchanged. The answer is to allow the market to work by ensuring competition and transparency, both of which are sorely lacking in our community today.