Tuesday, April 22, 2008

Tier 4 Drug Pricing

As a follow-up to my post last week about the economics of drug dosing, the Times has published another piece looking at the growing popularity of Tier 4 drug pricing among insurance plans.
"With the new pricing system, insurers abandoned the traditional arrangement that has patients pay a fixed amount, like $10, $20 or $30 for a prescription, no matter what the drug’s actual cost. Instead, they are charging patients a percentage of the cost of certain high-priced drugs, usually 20 to 33 percent, which can amount to thousands of dollars a month."
As I've previously argued, private insurance fundamentally makes no sense:
"But the new system sticks seriously ill people with huge bills, said James Robinson, a health economist at the University of California, Berkeley. “It is very unfortunate social policy,” Dr. Robinson said. “The more the sick person pays, the less the healthy person pays.”

Traditionally, the idea of insurance was to spread the costs of paying for the sick.

“This is an erosion of the traditional concept of insurance,” Mr. Mendelson said. “Those beneficiaries who bear the burden of illness are also bearing the burden of cost.”"

Any reasonable analysis of the insurance system should have predicted that this would occur. It was only a matter of time.

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