In the US a diagnosis is necessary in order to receive any insurance coverage for psychiatry and psychotherapy. Without one, most insurance companies will only pay for about 12 sessions a year. And then clients are forced to pay out of pocket, most of whom can't afford to, and therefore end up with nothing.

I don't see why a diagnosis is a negative though. Yes it is based on the medical model, so a personality disorder diagnosis won;t get you the best coverage, but since MDD usually accompanies a PD, then the addition of this to your diagnosis means access to comprehensive care. A psychiatrist will usually recommend therapy with counselor or social worker. A good one will assess the whole picture - health, social factors, work and education, financial needs, etc when devising a treatment plan. All this is essentially what you're describing as a formulation. The diagnosis is a necessary part of the picture, but used my most clinicians as means to an end - as a way to ensure their clients get insurance coverage.