Mid-week update

Now that we are past the State of the Union address, the next toll gate in the legislative year is the submission of the President’s FY 2016 budget proposal.  The Hill reports that for the first time since 2010 the President will submit his budget proposal on time — the first Monday in February, which this year is February 2.  From an FEHBP perspective, we also are waiting for two important Congressional actions — resolution of the Homeland Security Department’s appropriations for the current fiscal year (the last remaining FY 2015 appropriations issue, deadline February 28) and resolution of the Medicare Part B physician reimbursement formula (deadline March 31). 

The Washington Post reports on a Blue Cross Blue Shield Association report on prices for hip and knee replacement surgeries. Presumably to no one’s surprise, the report concludes that high prices do not correlate with high quality.  Because the article uses the terms “price” and “cost” rather interchangeably, it is important to understand that price and cost are independent variables.   Prices do not necessarily reflect cost. Prices reflect what the market will bear.

In a similar vein, the Wall Street Journal’s Pharmalot blog reports on a National Bureau of Economic Research study about the high cost of cancer treatment drugs.  The report attributes the high cost of these drugs to several factors, including the facts that health coverage acts as a price support, doctors are used to rising prices and

the effect of the growing 340B Drug Discount program in which drug
makers must offer discounts of up to 50% on all outpatient drugs to
hospitals and clinics that serve indigent populations. Drug makers, they
speculate, may offset the growth in this program by setting higher
prices elsewhere.

“We argue that, under these conditions, manufacturers are able to set
the prices of new products at or slightly above the prices of existing
therapies, giving rise to an upward trend in launch prices,” write the
authors, one of which is Peter Bach,
a physician at Memorial Sloan Kettering Cancer Center in New York, who
has been outspoken about the rising prices for cancer treatments.

Also with respect to medical advances, the New York Times reports that  “A patient who received an artificial heart in August has recovered
sufficiently to return home, the French company that makes the device
said on Monday, signaling a milestone toward the possible
commercialization of the device.”  The patient who received the device was suffering from congestive heart failure.