Does insurance work this way?

Comments from Dr. Mark Smith, CEO of the California Health Care Foundation...talking about how insurance (doesn't) work...descriptions below are great...BD

It’s like trying to sell a car that's bundled together with car insurance and three dozen eggs every week and a trip to Bermuda when you turn 27. Those are kind of different things and people will be differentially inclined to buy them, but if they’re bundled together you have a pretty dysfunctional product. That’s part of why we have such difficulty in the public space agreeing on what is adequate insurance. Particularly if our notion as to how people will get it is they will be forced to buy a product from a company that they do not like or respect and which they have a hard time seeing how they will personally benefit from.

Perhaps at the end of this someone can explain to me why we would insist on paying Aetna 12 bucks so Aetna can pay Medco 10 bucks, so Medco can pay CVS 7 bucks, so CVS can collect a 5 dollar copay per patient, for a drug that the patient could have gone to Costco and paid 4 dollars for.