co-pay conundrum

From Gina Kolata with the New York Times (hat tip: Chris Lang)...

Health insurance companies are rapidly adopting a new pricing system for very expensive drugs, asking patients to pay hundreds and even thousands of dollars for prescriptions for medications that may save their lives or slow the progress of serious diseases.

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.

The system means that the burden of expensive health care can now affect insured people, too.

A number of things to say so far:

-I hadn't thought about it before, but it's a bit surprising that the consumer's cost of drugs would ever have been fixed instead of a (fixed) percentage.

-Part of this may be the extent to which health insurance is a competitive market or not.

-That said, there is an inherent problem in health insurance-- as coverage for an on-going illness. Key point: Insurance typically covers one-time events. Insurance for on-going but connected events is prone to potential abuse by market participants (consumers trying to get coverage after growing ill) and insurance companies (changing the rules after the fact).

-The writer is incorrect in that the cost of health care has always burdened those who are insured. The cost of providing insurance is closely connected to the cost of purchasing insurance.

No one knows how many patients are affected, but hundreds of drugs are priced this new way. They are used to treat diseases that may be fairly common, including multiple sclerosis, rheumatoid arthritis, hemophilia, hepatitis C and some cancers. There are no cheaper equivalents for these drugs, so patients are forced to pay the price or do without.

This gets to the inherent tension in allowing for patents-- a far greater incentive to invent such things, but an artificial monopoly until the patent expires or the market can create a close substitute.

Insurers say the new system keeps everyone’s premiums down at a time when some of the most innovative and promising new treatments for conditions like cancer and rheumatoid arthritis and multiple sclerosis can cost $100,000 and more a year....

True (at least in a competitive market)-- and great for the group, but a tough trade-off for the individual.

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.”

Not exactly. We don't think of fire or auto insurance as "spreading the costs". It has that effect but that is not its purpose.

And an interesting quote: as long as the rules don't change in the middle of the game (see above), then we would want riskier people to pay more than less risky people, right? But to Dr. Robinson's point, this is a mixed bag in terms of social policy-- better overall, but tough on individuals.

And often, patients say, they had no idea that they would be faced with such a situation.

Now, that's a/the problem...