TIER 4….According to the New York Times, the “fastest-growing segment in private insurance” is a new pricing category for expensive drugs called Tier 4. “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.”

Jon Cohn writes that using government bargaining power to drive down drug prices might help here, but the real problem is that the incentives for private insurers to reduce coverage for their most expensive — i.e., sickest — clients is simply too strong:

In the long run, the real solution here is to create an insurance system that doesn’t provide financial incentives for shifting costs onto the sick. And the only way to do that is to create a system for everybody, with relatively generous benefits, so that the burden for high medical expenses is spread across the entire population.

….But this brings us back to the political challenge of universal coverage. No matter what kind of proposal reformers end up supporting, a lot of people will eye it suspiciously — and assume it’s worse than what they have already.

Today’s Times story is a reminder of how misguided that thinking is. Even Americans with “good” insurance may not have the kind of protection they need in case of severe illness. They may feel secure, but they are just one illness or injury away from serious financial hardship.

Are they willing to take that chance?

Not for much longer, I imagine. As the number of companies offering coverage declines; as premiums increase; as formularies become less generous; and as clever new cost control techniques like “Tier 4” become more common, fewer and fewer Americans are going to stay attached to their current private coverage. Canada is looking better ever day, eh?

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