Medicare Will Cover Obesity Screening and Treatment

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Medicare, which covers some 42 million American seniors, will pay for obesity screening and behavioral therapy as part of its portfolio of preventive services.

About 72 million American adults, including about a third of Medicare recipients, are obese, and the related health-care costs total some $325 billion a year. The federal decision will now allow Medicare beneficiaries to see their doctors for regular weight-loss counseling — a low-cost, low-tech solution — and may spur private insurers to do the same.

According to the Centers for Medicare and Medicaid Services' decision summary, obese Medicare beneficiaries — with a body mass index of 30 or higher — seeking weight-loss counseling may see their primary care physician for one face-to-face visit every week for the first month. Then, Medicare will pay for one face-to-face visit every other week for the next five months. If the patient loses at least 3 kg (6.6 lbs.) over the first six months, Medicare will pay for an additional six months of once-a-month face-to-face visits with the doctor.

MORE: Number of Normal-Weight Americans Edges Out the Overweight

Despite the overwhelming rates of obesity in this country, few people have been diagnosed with a weight problem by their primary care physicians. In a 2007 Mayo Clinic study of nearly 10,000 primary care patients, about one quarter were obese; of those, only about 1 in 5 had a diagnosis or treatment plan for obesity. For older patients, the rate was even lower.

As the Los Angeles Times reported:

While research finds that physician counseling can be a powerful prod to weight loss for those who need it, many physicians have been reluctant to offer it. While some of that reluctance has stemmed from an absence of insurance reimbursement for such services, many also cite patient pushback and a lack of effective tools as reasons for shrinking from the task of identifying obesity, counseling patients about its health hazards and getting them started on a weight-loss program.

Medicare coverage isn't going to change the fact that we still don't have foolproof tools to help people lose weight, or that patients will push back — no one likes to hear that they're obese, after all — but if the federal decision helps lead to more obese people losing even small or moderate amounts of weight, it could be life-changing.

"As small of a weight loss as 5% to 7% can lead to a huge health improvement," Christy Ferguson, director of the STOP Obesity Alliance, told USA Today, noting also that obesity programs should emphasize an overall healthy lifestyle as well as weight loss. "It's not necessarily weight loss so much as it is increased fitness level and increased health."

The coverage is effective immediately, so Medicare recipients may be screened as soon as their next appointment.

Meredith Melnick is a reporter at TIME. Find her on Twitter at @MeredithCM. You can also continue the discussion on TIME's Facebook page and on Twitter at @TIME.

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Cigna to buy Medicare co HealthSpring for $3.8 billion

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By Lewis Krauskopf

Mon Oct 24, 2011 5:09pm EDT

n">(Reuters) - Health insurer Cigna Corp will buy HealthSpring Inc for $3.8 billion to jump-start its business selling Medicare plans as more elderly Americans become eligible for the U.S. government program.

Medicare is an enticing market for U.S. health insurers, even as Congress weighs cuts to the program to rein in the country's debt.

In particular, the entry of the postwar baby boom generation into retirement is expected to swell the ranks of privately run Medicare Advantage plans, which now account for 25 percent of Medicare enrollment, compared with 75 percent for government-run plans. Medicare beneficiaries can choose to receive their benefits through private health insurance plans.

"The expectation is that that 25 percent rate will increase," Jefferies & Co analyst David Windley said. "There's some increasing view that the political pendulum has swung in favor of Medicare Advantage plans in recognition that they are the one group out there doing something to reduce Medicare costs."

Wedbush Securities analyst Sarah James projects private insurance plans could comprise about half of Medicare over the next five years.

Medicare contractors receive payments from the government and then market their plans directly to seniors. Compared to government-run plans, they have narrower networks of physicians that allow them to keep their costs lower. The companies also try to limit medical claims by driving members to seek preventive care so they avoid costly hospitalizations.

"The basic proposition to the beneficiary has always been ... by going into a narrower network, we will provide you with richer benefits," said John Gorman, head of the Gorman Health Group, a consulting firm focused on government-sponsored plans.

UnitedHealth Group Inc and Humana Inc are the largest private players in Medicare Advantage, with 2.2 million and 1.6 million members respectively. Large insurers WellPoint Inc and Aetna Inc have also struck deals to expand their presence in Medicare, but Cigna's purchase of HealthSpring is by far the biggest single bet.

(For a graphic on major health insurance deals, see: link.reuters.com/sak64s.)

HealthSpring has about 340,000 Medicare Advantage members in 11 states and the District of Columbia, making it the sixth-biggest player, according to Susquehanna Financial Group analyst Chris Rigg. Cigna has 46,000 Medicare Advantage members. HealthSpring also has more than 800,000 enrollees in stand-alone Medicare prescription drug plans.

CIGNA CEO MOVES TO DIVERSIFY

The deal represents a major diversification for Cigna and the most significant move by Chief Executive David Cordani since he took the helm nearly two years ago. Cigna had focused its U.S. health insurance plans on businesses, though Cordani sought more international expansion.

While overall merger activity has slowed in the last few months, transactions such as the HealthSpring buy are happening as companies look to expand into new businesses or cut costs.

Recent deals include Kinder Morgan's $21 billion deal for El Paso Corp and Google's planned $12.5 billion buy of Motorola Mobility Holdings Inc.

Cigna plans to buy HealthSpring for $55 a share, a 37 percent premium over Friday's closing price, the companies said in a statement on Monday. HealthSpring shares closed up 33.7 percent at $53.71, while Cigna rose 1.4 percent to $45.34.

Cigna said it would issue new equity to cover about 20 percent of the purchase price, with the rest funded by additional debt and cash. It expects the deal to add to its earnings per share in the first full year of operations.

Shares of other health insurers that specialize in Medicare rose after the deal was announced. Humana rose 4.7 percent, Universal American Corp gained 3.9 percent, and WellCare Health Plans jumped 8.8 percent.

"There are still a few larger plans in the industry that want to become bigger Medicare players, and the number of plans out there ... with more than 50,000 lives is relatively small," Citigroup analyst Carl McDonald said in a research note.

Shares of Canadian pharmacy benefit manager SXC Health Solutions Corp, which counts HealthSpring as a major client, fell 23 percent on fears the business may go to Cigna.

Investors have expected consolidation in the health insurance industry as a U.S. healthcare overhaul enacted last year squeezes smaller companies and creates incentives for larger companies to take advantage of scale.

The lack of major deals to date may stem from concerns that the Obama administration and state insurance regulators could push back against transactions that threaten competition or drive premiums higher.

Asked whether the HealthSpring deal would face regulatory hurdles, Cordani told reporters on a conference call that it was a "segment expansion" into an area where the company is not a large player and therefore should not meet opposition.

"It's not a scale-based consolidation," Cordani said. "We're obviously aware of the environment around scale-based consolidation."

The deal is expected to close in the first half of 2012.

MEDICARE MORE VALUABLE

The deal values HealthSpring at a "relatively rich" $3,200 per member, compared with the current industry average of about $869, Wells Fargo analyst Peter Costa said.

Medicare Advantage members bring in about three times as much revenue as commercial members, according to Susquehanna's Rigg. Because Medicare members are older, they typically have more need to see doctors and pay higher premiums than younger people who receive insurance through their employers.

"The person who is 70 years old uses a lot more healthcare," Rigg said. "It's lower margins, but higher overall dollars."

Profit margins for Medicare Advantage plans tend to range from 3 percent to 5 percent, Gorman said.

HealthSpring's management, headed by CEO Herb Fritch, will now lead Cigna's Medicare expansion.

Separately, Cigna raised its forecast for 2011 adjusted earnings to a range of $5.05 to $5.30 per share from a previous view of $4.95 to $5.25.

Cigna's financial adviser is Morgan Stanley and its legal adviser is Davis Polk. Moelis & Co advised on the deal financing. Goldman Sachs & Co was the financial adviser to HealthSpring, whose legal advisers were Skadden, Arps, Slate, Meagher & Flom LLP and Bass, Berry & Sims Plc.

(Reporting by Lewis Krauskopf in New York; additional reporting by Toni Clarke in Boston; Editing by Michele Gershberg, John Wallace and Tim Dobbyn)

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Limits on supplemental Medicare plans eyed

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An elderly man walks past The National Debt Clock, which displays the current United States gross national debt and each American family's share, on a wall in midtown Manhattan, in New York July 13, 2011.

Credit: Reuters/Brendan McDermid

By Donna Smith

WASHINGTON | Mon Oct 10, 2011 1:13am EDT

WASHINGTON (Reuters) - Medicare supplemental health plans, popular among politically powerful retirees, could come under the budget knife being wielded by the special deficit-reduction panel of Congress, according to sources keeping close watch on its work.

The so-called "Medigap" insurance plans shield the elderly -- many living on fixed incomes -- from costly deductibles and other expenses not covered by the traditional fee-for-service Medicare healthcare program.

"This one is clearly on the table," said a lobbyist who has been following "super committee" deliberations on ways to trim federal budget deficits by at least $1.2 trillion over 10 years.

But super committee Democrats are unlikely to vote to saddle retirees with new out-of-pocket expenses if Republicans refuse to embrace tax increases for the wealthy.

While the elderly buy the private plans, studies suggest they boost government Medicare costs as the extra coverage for deductibles and co-pays encourages greater use of medical services. That, in turn, pushes up costs for Medicare, which has to pay for its portion of the care.

As a result, proposals to limit the plans have been included in a number of deficit reduction packages, including one proposed by President Barack Obama.

A congressional aide, who did not want to be identified, told Reuters it was one of the ideas being reviewed by the super committee.

Medigap plans are popular among people who choose not to enroll in Medicare Advantage plans, which deliver Medicare benefits through private insurers, or have no employer-backed retirement health benefits. Some Medigap plans pay nearly all the relatively high Medicare cost-sharing requirements.

The federal government already regulates Medigap plans, which are offered by insurers such as United Healthcare Insurance, a unit of UnitedHealth Group Inc, and Bankers Life and Casualty Company, a unit of CNO Financial Group Inc..

Of some 46 million people enrolled in Medicare, about 9 million have signed up for one of 10 standardized Medigap plans. A majority are enrolled in plans with little or no deductibles or cost-sharing requirements, according to the Kaiser Family Foundation.

ON THE TABLE

Budget analysts argue that getting "more skin in the game" by requiring Medicare enrollees to pay a share of costs that otherwise would be covered by Medigap plans would discourage unnecessary visits to the doctor.

In his submission to the super committee, Obama proposed a 30 percent surcharge on premiums for new Medicare beneficiaries who buy low deductible Medigap plans starting in 2017.

The non-partisan Congressional Budget Office said Obama's proposal saved an estimated $2.5 billion over 10 years. But the budget savings would grow over time as new Medicare enrollees turn to higher deductible Medigap plans to save money.

More far-reaching proposals that would affect current holders of low deductible Medigap plans would save even more -- as much as $93 billion over 10 years, according to the CBO.

The six Democrats and six Republicans on the super committee have until November 23 to develop a deficit-reduction plan. If it fails, a similar amount of across-the-board spending cuts would be automatically triggered starting in 2013. Congress will have one month to vote on any super committee deal.

DISCOURAGING NECESSARY CARE

Obama's bipartisan fiscal commission last year suggested requiring a $550 deductible on Medigap plans and limiting coverage on the next $5,000 of costs to 50 percent. CBO said such a plan would save about $53 billion over a decade.

The health insurance industry and healthcare advocates oppose moves to restrict Medigap plans. They argue that limiting coverage would not just discourage unnecessary doctor visits, it would discourage necessary care.

"My hope is that Democrats are going to be loath to make changes in something that deals with out-of-pocket expenses for seniors and I believe they will be," said Ron Pollack, executive director of Families USA.

The National Association of Insurance Commissioners wrote the super committee last month to urge the panel to avoid changes that would affect current policy holders.

"An abrupt alteration of the Medigap cost-sharing benefits for in force policies will cause a major market disruption and cause serious confusion for seniors," the group wrote.

The insurance commissioners also noted that two new types of Medigap policies, which require higher cost sharing, were introduced into the market only last year. More time is needed to gauge their effect on the Medicare program, the letter said.

(Editing by Doina Chiacu)

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FDA, Medicare to review medical devices in tandem

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By Alina Selyukh

Fri Oct 7, 2011 3:23pm EDT

n">(Reuters) - U.S. health officials are launching a trial of a program meant to speed up Medicare payment decisions for new medical devices.

The Food and Drug Administration, which regulates the safety and effectiveness of the devices, will review new products in parallel with the Centers for Medicare and Medicaid Services, the agencies said on Friday.

The pilot program could help device makers avoid situations in which they receive FDA approval only to discover that their products fail to win coverage under Medicare, the federal insurance program for the elderly.

Currently, Medicare often does not begin its reviews until the FDA -- which is not supposed to take cost into consideration -- approves the products. A Medicare coverage decision can make or break a medical product.

"The parallel review program has the potential to increase patient access to innovative devices that improve clinical outcomes," CMS Chief Medical Officer Dr. Patrick Conway said in a statement. "Our goal is to reduce regulatory burden and improve patient outcomes."

The Advanced Medical Technology Association (Advamed), which represents device makers, said it was still looking at the program's details but supported any effort to boost timely reviews that are more predictable and efficient.

"However, we believe it is important to preserve the currently separate and distinct regulatory missions of FDA and CMS to ensure that each agency does not influence the functions and decisions of the other and to ensure the confidentiality of all proprietary information provided by manufacturers," Ann-Marie Lynch, Advamed's executive vice president for payment and healthcare delivery policy, said in a statement.

The FDA and the CMS said the "parallel review" process will not change their distinct standards. The agencies on Friday began accepting submissions for participation in the pilot program, which is voluntary and was proposed in September 2010.

For more on the program, please see www.fda.gov/parallel-review .

(Reporting by Alina Selyukh in Washington; Editing by Steve Orlofsky)

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