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.

“The history of surgical procedures is: Once they are introduced, people go gangbusters,” Phurrough said.

The American Diabetes Association recommends diabetics who undergo bariatric surgery keep tracking blood glucose, as the procedure is not a cure.

“People are advocating doing the surgery in people who are less and less overweight, and we are getting to an area where there is basically no data,” said John Buse, the ADA’s president for medicine and science, and director of the University of North Carolina’s endocrinology department.

A small but compelling study was published earlier this year in the Journal of the American Medical Association.

After two years of follow-up of about 60 patients, 73 percent achieved remission of diabetes, compared with 13 percent of those who followed conventional therapy of diet and blood-sugar control.

But the comparison group did not get aggressive treatment, Buse said, noting that most studies to date have been not scientifically rigorous.

TIP OF ICEBERG

Obesity surgeries have risen dramatically in recent years, from 23,100 procedures in 1997 to an estimated 205,000 in 2007, according to the American Society for Metabolic & Bariatric Surgery.

Employers and insurers see a big price tag, as well as the risk of severe complications, including bleeding, pneumonia, heart issues and even death. These can tack on even more costs from emergency room visits and additional hospital stays.

The surgeons’ group says only 1 percent of those eligible for weight-loss surgery seek it out.

“Even the numbers that are going up so dramatically are the tip of the iceberg,” said LuAnn Heinen, a vice president at the National Business Group on Health, which represents large U.S. employers.

Officials of insurers Cigna Corp, Aetna Inc and the Blue Cross Blue Shield Association said it was too early to make any coverage changes based on available data.

It would take five to 10 years for an employer to recoup surgery costs by not having to pay for other treatments and medications, such as insulin injections, according to a study by the Research Triangle Institute, which consults for business and governments.

“It’s clear to me that a lot of employers would not see an ROI (return on investment) in this,” Heinen said.

Research by Pierre Cremieux, a health economist at Analysis Group in Boston, indicates the return on investment for laparoscopic bariatric surgery for the obese population is about two years, while the return on investment for the diabetic population is between 1-1/2 and two years.

J&J is funding Cremieux’s study.

By Kim Dixon and Debra Sherman
WASHINGTON/CHICAGO (Reuters)