‘Pubs Love Catastrophic Coverage. Too Bad the Free Market Doesn’t Provide It

Perhaps with very good reason, free-marketeers believe that catastrophic health coverage produces the best market efficiencies. People pay for everyday health care out of their own pockets, which gets them to shop for services and ask what the cost is, pushing costs down. They have an inexpensive insurance plan with a high deductible to cover the really bad stuff.

I’m a believer–at least when it comes to my own coverage. I have a $3,500 annual deductible, and my premiums are well below $5,000 a year.

But my plan only covers generic drugs, which is exactly the opposite of what I want. I want to pay for my own generic drugs (I just made the rational choice to switch from name-brand Lipitor to generic Simvastin because the cost-benefit analysis is obvious), but be covered if the worst occurs–some kind of terrible disease that can only be treated by a wildly expensive non-generic drug.

It’s called catastrophic prescription coverage, and it’s completely unavailable, at least in Washington State.

No, put that thought out of your mind: it’s not the government’s fault. I asked the insurance commissioner’s hotline, and they say that there are no rules preventing insurers from offering that kind of coverage. It’s just that none of them do.

Even among Cadillac comprehensive plans, every single one has a low ($2,000-$5,000) annual cap on what they’ll pay for name-brand drugs.

One insurance rep I talked to surmised that maybe they couldn’t offer such a plan for what people would be willing to pay. Maybe.

But I’m here to ask, how do they know if they don’t even try? Here’s one customer who’s ready to lay down serious cash on the barrelhead.

Markets constantly fail to offer what people want and are clamoring to pay for. (Think: high-MPG turbodiesels that are widespread in Europe and Asia, made by the very companies that for some reason don’t offer them here. Just try to find a used VW TDI.) I really can’t figure out why. Thoughts?







3 responses to “‘Pubs Love Catastrophic Coverage. Too Bad the Free Market Doesn’t Provide It”

  1. BigSis Avatar

    Ah – my personal pet peeve.

    One possible explanation (recommended by Occam’s Razor) is, well, stupidity. In my experience in corporate life, even when many (or at least some) of the individual human beings that work in a company or industry are bright enough – as a group they will follow what they “know” and/or can be led to believe.

    The insurance copay on my generic synthetic thyroid hormone – which is one of the cheapest drugs – is actually more than what it costs to buy the meds directly from Costco.

  2. Grant Avatar

    I don’t know anything about health insurance, but diesel fuel is taxed more heavily than unleaded in the US, where the opposite is true for Europe. Despite this, diesels are becoming increasingly popular in the US, for obvious reasons.


    Assuming the guy on the hotline actually knew what he was talking about, I would imagine a freer insurance market would have more smaller firms which would be more likely to offer a product you wanted.

    That said, matching a product to consumer demand is extremely difficult, for reasons I’m sure the author knows.

  3. Asymptosis Avatar

    Thanks, Grant. The SA article still leaves me pretty unsatisfied, though, re: “the reason you see so fewer diesel cars in the U.S. is more of a choice by automakers”

    I wish they’d gone and asked a few auto executives (which is what I’d like to do): “There’s more demand than supply, isn’t there? Why don’t you increase supply?”

    Yes it’s definitely difficult. But I see (or only imagine?) a big supply/demand disparity here that in theory, markets should react to.

    BigSis: I agree. My guess is there’s an ingrained and largely unexamined belief throughout the industry that “Americans don’t want them,” and that that belief is self-perpetuating.