Obesity surgery for diabetes is a tough sell

By Kim Dixon and Debra Sherman - Analysis

WASHINGTON/CHICAGO (Reuters) - Even as the U.S. government considers paying for weight-loss surgery to treat the most common form of diabetes, the costly procedure will be a tough sell for employers and insurers.

The U.S. Medicare program, the federal health plan for 44 million elderly and disabled, is considering reimbursement amid findings that bariatric surgery can have a dramatic impact on Type 2 diabetes, which has reached epidemic levels in the United States.

Wall Street is anxiously awaiting a decision, since increased coverage would help medical device makers like Johnson & Johnson and Allergan Inc.

Type 2 diabetes, marked by high blood sugar from insufficient levels of insulin, afflicts nearly 21 million Americans, or 7 percent of the population. While bariatric surgery does not technically "cure" the disease, it has been shown to drive it into remission.

"The effect is almost immediate," said Dr. Philip Schauer, director of obesity surgery at the Cleveland Clinic.

"This is a new area of intense debate ... and insurance companies are scared to death" because of the high price tag, said Schauer, the lead investigator in a trial that studied the effects of surgery on diabetes.

Medicare and many big employers now help pay for the surgery -- which ranges from $15,000 to $35,000 for more complicated gastric bypass -- in severely obese people.

Many employers cover the surgeries for patients with a body mass index -- a measure of weight in relation to height -- above 40, as well as for those who have a BMI of 35 and another obesity-related illness such as diabetes, hypertension and cardiovascular disease.

Now Medicare is looking at covering diabetic patients with lower BMIs.

"We are not looking at them as weight-loss surgery," said Steve Phurrough, director of coverage at the Centers for Medicare and Medicaid Services.

The most common bariatric procedure is gastric bypass, where a surgeon reduces the size of the stomach from the size of a football to a golf ball, limiting calorie absorption.

In another procedure, surgeons wrap an adjustable silicone band filled with saline around the stomach to create a small pouch, slowing digestion. The bands, sold by Allergan and J&J, affect diabetes more slowly and less dramatically than traditional bypass surgery, studies show.

The comment period for Medicare's proposal closes June 18 and a final policy decision is expected in late 2008.

LIKE GANGBUSTERS

Despite early signs that the surgery can help diabetics, whose condition is costly to treat, some worry that the procedure could take off with scant evidence.