Report IDs states with most, least dual eligibles

The Daily Briefing

Report IDs states with most, least dual eligibles

Maine, Alabama have the largest percentage of dual eligibles as a share of Medicaid

May 30, 2012

Eastern states have higher percentages of “dual eligible” patients as a share of Medicaid than Western and Midwestern states, according to a new Kaiser Family Foundation report.

Altogether, about nine million U.S. residents and more than 15% of all U.S. Medicaid beneficiaries are eligible for both the Medicare and Medicaid program.

To determine the geographic distribution of these “dual eligibles,” the Kaiser Commission on Medicaid and the Uninsured and the Urban Institute analyzed Medicaid Statistical Information Statistics data from fiscal year 2008.

Related: The Advisory Board’s primer on new efforts to coordinate care for dual eligibles.

The report found that the 10 states with the highest percentages of dual eligibles as a share of total Medicaid enrollment were:

1. Maine (where 26% of Medicaid beneficiaries are dual eligibles);
2. Alabama (23%);
3. North Dakota (22%);
4. Kentucky (21%);
4. New Jersey (21%);
4. Wisconsin (21%);
7. Florida (20%);
7. Mississippi (20%);
7. Rhode Island (20%); and
7. West Virginia (20%). 

Meanwhile, the 13 states with lowest percentages of all dual eligibles as a share of total Medicaid enrollment were:

1. Arizona (where 10% of Medicaid beneficiaries are dual eligibles);
1. Utah (10%);
3. Alaska (11%);
3. California (11%);
3. New Mexico (11%);
6. Delaware (12%);
6. Colorado (12%);
8. District of Columbia (13%);
8. Illinois (13%);
8. Michigan (13%);
8. Washington (13%); and
8. Wyoming (13%).

A state-by-state map of dual eligibles as a share of total Medicaid enrollment

According to the report, “these variations reflect a state’s demographic profile as well as state policy choices in Medicaid eligibility and coverage.” For example, the report notes that Eastern states generally have larger elderly populations than Western and Midwestern states.

Kaiser notes that 26 states have submitted proposals to test integrated care models for dual eligibles under a three-year, multi-state demonstration project (Kaiser report, 5/24; AHA News, 5/25).

States crack down on prescription-drug “doctor shopping”

Wed, May 30 2012

By Mary Wisniewski

CHICAGO (Reuters) – When a new patient comes into Dr. Shawn Jones’ office in Paducah, Kentucky complaining of pain and asks for a specific drug without talking about other symptoms, Jones gets suspicious.

“The first thing they say is they’re in horrible pain and they need pain medicine,” said Jones. “The other thing that gives it away is they want to tell you what works – they tell you they want Percocet. They don’t talk about their symptoms – they don’t say, ‘Oh, two weeks ago I hurt my back.'”

These are the types of red flags that can send Kentucky doctors to check a state database to see if a patient is “doctor shopping” for addictive painkillers.

Prescription drug abuse kills more people a year in the United States than cocaine and heroin combined, according to the Centers for Disease Control. A CDC report last year said 15,000 people died as a result of overdoses of prescription painkillers in 2008 – more than three times the number in 1999.

Kentucky is a hot spot. Nearly 1,000 people in the state died from prescription drug overdoses in 2010, or about three a day, ranking it among the top states for such deaths.

In America as a whole, about 12 million people aged 12 and older reported non-medical use of prescription painkillers in 2010.

Abusers and dealers typically get drugs by finding doctors willing to prescribe them, forging prescriptions, theft from pharmacies or individuals, or buying from “pill mills” — storefront clinics that sell painkillers for cash up front.


State databases such as one used in Kentucky are designed to address the first problem — to alert prescribers that someone may be abusing drugs or diverting them for illegal sale.

Forty-three states now have databases to keep track of who is getting prescriptions for powerful pain relievers such as oxycodone, Vicodin and Opana.

Pharmacists enter prescriptions for controlled substances into the database, so prescribers can see if patients are getting pills at multiple locations.

Another five states have passed laws to create databases, but have not yet implemented them. Missouri and New Hampshire do not yet have such laws, though they have been introduced in the legislatures, according to Sherry Green, CEO of the National Alliance for Model State Drug Laws. There is no national database, though more states are sharing information.

For some doctors, running a “PMP” — shorthand for a Prescription Monitoring Program report — has become as normal a part of seeing new patients as measuring blood pressure.

But the programs have not been without controversy, with a major issue being whether doctors should be required to check the database when prescribing addictive medicine, or whether this should be left to their discretion, said Green.

Some doctors have expressed fears that PMPs could breach patient confidentiality and interfere with needed treatment of pain or could be used against doctors who need to prescribe a lot of pain medicine.

Doctors also object to proposals they see as putting law enforcement above health care. Citing privacy concerns, the Kentucky Medical Association fought successfully against a provision that would have moved the state’s database to the Attorney General’s office, the state’s top legal officer.


In Kentucky, fewer than a third of prescribers have an account with the state’s PMP program. However, a new state law, which will take effect on July 12, makes it mandatory to run a PMP for a new patient getting certain kinds of medicine. Nine other states have passed laws that require doctors to access the PMP database under certain circumstances.

“Before we can ever address the prescription-drug problem … one of the things we have to do is to make sure we have full use of the tools we have,” said Van Ingram, executive director of the Kentucky Office of Drug Control Policy.

Enforcement is up to state medical boards and state systems vary. But most allow doctors and pharmacists to access information from neighboring states – something that helps address the problem of abusers driving over state lines to find a willing doctor.

Improved technology, with a push by the National Association of the Boards of Pharmacy, is helping more states share data.

Doctors and pharmacists who suspect a patient is diverting can alert police. “If you recognize someone is a doctor shopper, you report it to the state police diversion agent,” said Sarah Melton, a clinical pharmacist in Virginia. “I have him on speed dial.”

Another issue for doctors is time, so states are trying to increase database speed so that doctors can get information while a patient is still in the office. About a dozen states allow doctors to delegate people to look up information.

Many states allow law enforcement to access the system – in limited circumstances, and a case must already be under investigation for officials to run a PMP report.

“You can’t just pick someone out of the phone book and run them,” said John Burke, president of the National Association of Drug Diversion Investigators and commander of the Drug Task Force in Ohio’s Warren County.


Doctors need to strike a balance between treating people who genuinely need pain medication, and making sure it doesn’t go to people who don’t, said Samuel Hughes Melton, the husband of Sarah Melton and the president of a Virginia health clinic.

He used a PMP report to discover that a long-time patient had picked up an opiate from another doctor, and had also obtained a prescription for benzodiazepine. The two can be deadly if combined.

“I was able to confront him in the exam room,” Melton said. “I was able to use that information and nudge him into treatment for substance abuse.”

There is some evidence that the databases are leading to the prescribing of fewer addictive medicines.

According to a study by the emergency department of the University of Toledo’s College of Medicine, doctors or pharmacists who reviewed state prescription drug data changed how they managed cases 41 percent of the time.

The study found that 61 percent prescribed either no opioid medications, or less than originally planned, while 39 percent decided to provide more.

“I know a number of emergency-room physicians tell us how much they appreciate the system to discriminate between real patients with real injuries and those who just want drugs,” said Danna Droz, the administrator of Ohio’s PMP.

Jones, the president of the Kentucky Medical Association, said doctors and pharmacists needed more education on abuse and diversion, as abusers become more sophisticated at fooling professionals.

He said he once got a call from a pharmacist questioning a prescription for 90 Percocet pills – when the pharmacist knew Jones rarely prescribed more than 20 pills at a time.

The prescription was forged. Jones reported it to police and the phony patient was arrested.

(Reporting By Mary Wisniewski; Editing by Greg McCune and David Brunnstrom)

$1 Cigarette Tax to fund Ill. Medicaid


Springfield Bureau Chief

Last Modified: May 30, 2012 03:58AM

Smokers are on the verge of having to dig deeper to support their habit after the Illinois Senate voted Tuesday to increase the state cigarette tax by $1 a pack.

The measure, which passed the Senate 31-27, now moves to Gov. Pat Quinn, who intends to sign the legislation as part of a health-care package designed to reduce state spending on Medicaid.

“I want to thank the members of the General Assembly who rose to the occasion to save our Medicaid system from the brink of collapse,” Quinn said in a prepared statement released after the vote.

“Last week, members of both parties passed legislation to create the necessary savings to save Medicaid. Today the Senate joined the House to prevent children from smoking and allow the state to access vital federal funding to save our Medicaid system,” the governor said.

Echoing Quinn, Senate President John Cullerton (D-Chicago) said during floor debate that the tax hike, separate of its necessity to stabilize the Medicaid program, will be a life saver.

“I’d vote for it if it didn’t bring in a penny because of the idea that we’ll have 77,600 kids who won’t start smoking just because you push a green button or 59,000 adults who’ll quit,” Cullerton said, referring to the colored voting switch lawmakers use to vote “yes.”

Quinn’s imminent signature on the measure means that total taxes on a pack of cigarettes sold in Chicago will total $5.67 and $4.99 in suburban Cook County.

The cigarette tax component is part of the equation Quinn is using to come up with $2.7 billion for Medicaid through a mix of service cuts and the tax hike.

Tuesday’s Senate vote, which followed House passage of the legislation on Friday, came on the strength of an entirely Democratic roll call.

Republicans condemned the tax hike bill, sponsored by Sen. Jeff Schoenberg (D-Evanston), because of worries it will drive Illinois smokers across the border to buy lower-tax cigarettes on most sides of the state.

The price difference would be most pronounced along the Missouri border, where cigarettes would be $1.81 less per pack than Illinois. Indiana cigarettes would be taxed at a rate that is 98.5 cents per pack lower than Illinois.

But even with an Illinois tax hike, Wisconsin taxes cigarettes at a higher rate: $2.52 per pack in state taxes alone.

GOP critics also said the emergence of the tax-hike legislation underscores how the Quinn administration and ruling Democrats at the Statehouse fell short to truly cut Medicaid, as the governor proposed, by $2.7 billion.

“The promise was to come up with $2.7 billion in reductions in the cost of Medicaid. Perhaps this bill would’ve been put forward even if we’d have met that challenge. But the reality is we didn’t meet the challenge,” said Sen. Kyle McCarter (R-Lebanon), who voted against the plan.

“We stopped short at $1.36 billion. We then went to a provider cut for $240 million,” McCarter continued, referring to rate reductions imposed against hospitals, nursing homes and other Medicaid providers. “We’re $1.1 billion short, and we choose to fill it with another tax increase.”





Copyright © 2012 — Sun-Times Media, LLC

Edelen Says He’ll Audit Private Medicaid Operators This Year

by KENNY COLSTON on MAY 29, 2012

After months of mounting problems, State Auditor Adam Edelen says he will launch a full investigation into Kentucky’s statewide Medicaid Managed Care system.

Edelen created a Medicaid task force in February after taking a first look at the managed care system. He also gave recommendations to managed care companies, health care providers and the state on how to make the system run better in the future.

But with clashes between private Medicaid companies and healthcare providers ongoiong, Edelen wants to take a stronger look into the system.

“We will launch a full blown audit of the managed care companies based on the information that’s being gathered right now, we’re going to launch that investigation by the end of the year,” he says.

The most recent problems with the system involve one operator, Coventry Cares, telling providers it wants to either re-negotiate contracts early or end them altogether. That has lead to lawsuits and it has threatened coverage in parts of the state.

“You’ve got a financial obligation and a moral obligation to making sure that the deal is indeed square for patients, providers and taxpayers,” Edelen says.

The state privatized Medicaid to save money last year. But a rushed start has led to the myriad problems the state is seeing now. Members of the General Assembly also plan to look into the Medicaid system during next year’s legislative session.

But before that audit, Edelen will take a look at special taxing districts across Kentucky.

Kentucky has roughly 1,800 quasi-governmental taxing districts, the most recognizable being Louisville’s Metropolitan Sewer District, Lexington’s Airport Board and Sanitation District 1 in Northern Kentucky. All three of those districts were audited separately by Edelen’s predecessor Crit Luallen. But Edelen says there are many more districts to look at.

“So what we’re gonna do on behalf of the Kentucky taxpayer is answer the question, how many are there? How much money floats through the system and how many are compliant with state law?” he says.

Edelen says history shows when groups use taxpayer money without being watched, that money is often abused. He predicts the various taxing districts handle more than one billion dollars each year.

“What we have found is, these government entities that operate in the shadows tend to get in trouble. They tend to misuse state taxpayer’s dollars. So what we know is, we have got to shine the light on these entities that have the ability to tax you the public. But they’re not just operating in the shadows, they’re operating in the pitch black dark and I intend to turn the lights on,” he says.

Edelen plans to start the audit next month.

The health insurance plans, they are a-changing

The Washington Post


Posted by at 04:18 PM ET, 05/23/2012

Health insurance plans will have to beef up on benefits if they want to stay in business under Obamacare, according to a new study out Wednesday afternoon from Health Affairs.

The health overhaul law mandates a wave of new requirements all intended to make health insurance more robust. It requires health plans to cover a set of “essential health benefits,” a comprehensive package of benefits outlined in the law. Health plans are also required to foot the bill for, on average, at least 60 percent of subscribers’ health expenses. In the individual market, insurers must also cap annual out-of-pocket expenses at $6,050 for individuals and $12,100 for families.

The University of Chicago’s Jon Gabel lead a team of researchers in examining how many health insurance plans in the individual market meet those requirements right now. He found that most didn’t: 51 percent will not be able to sell on the new health insurance exchanges without increasing their benefits. A lot of that had to do with individual market plans not offering maternity coverage, one of the more costly benefits — and one that plans must pay for under the Affordable Care Act.

Assuming these health plans want to stay in business — boost their benefits — what will that mean for the individual market? Most obviously, health insurance will become more robust. “The provisions of the Affordable Care Act will not only extend new coverage to millions of uninsured Americans but vastly improve the coverage of many who are insured but poorly protected by their health plans,”says Commonwealth Fund vice president Sara Collins.

As health insurance benefits become more expansive, that also means they get more expensive: Multiple state analyses estimate that their individual market premiums will rise after the new regulations come into play. Most of that increase, however, is likely due to changes in the demographics of the individual market rather than the additional benefits. As patients with preexisting conditions enter a marketplace they were previously locked out of, their costlier health care needs are expected to push up premiums.

Coventry sends out letters alerting Medicaid patients

Coventry sends out letters alerting Medicaid patients their physicians have left E. Ky. practices … except they haven’t

By Terry Boyd | Published: May 23, 2012


Click to enlarge.

How do Medicaid managed care insurers give the ol’ heave-ho to physicians who might have too many high-risk Medicaid patients in Kentucky’s poorest counties?

Apparently, they send out letters to members announcing those physicians no longer work at their respective practices, even though the doctors are still very much in place.

For example, last Friday, insiders started telling Insider Louisville that Medicaid managed care members in Eastern Kentucky were getting letters from Bethesda, Md.-based Coventry Health stating their physicians were no longer at Big Sandy Health Care.

Big Sandy is a private, non-profit corporation based in Prestonsburg that operates medical clinics, dental clinics and women’s practices  in various parts of southeastern Kentucky including Pikeville.

Big Sandy CEO Ancil Lewis confirmed yesterday his system’s Medicaid patients have received letters from Coventry stating certain doctors are no longer with the health care system.

Whether they were sent to deceive Medicaid members into leaving Big Sandy and possibly shifting them ultimately to one of the other two Medicaid managed care contractors isn’t clear, Lewis said. “Those letters are in error. I can’t say whether it’s a ploy or incompetence. But the letters are in error.

“The doctors named in the letters are still with Big Sandy.”

Other sources say Medicaid patients in Eastern Kentucky received similar letters from Coventry notifying them their doctor is no longer employed at their clinics, or their pharmacy was no longer covered under Coventry.

The common denominator in the moves is the doctors, clinics and pharmacies all have large numbers of high-risk patients, our sources say.

This latest issue arises after Coventry ended up with a disproportionate share of high-risk patients for several reasons including the insurer waiving drug co-pays during the initial open enrollment period.

Matt Eyles, vice president of Public Affairs and Policy at Coventry’s headquarters in Bethesda, Md. initially asked for time to research the issue, but did not get back to Insider Louisville.

Circulating inaccurate information is only one issue Big Sandy is having with Coventry. Coventry’s reimbursement methods make it impossible for Big Sandy’s accounting system to document whether the system is getting properly reimbursed for services.

“Their accounting is very different” from the previous system, Lewis said. “We don’t know exactly what we’re being reimbursed for, or whether we’re being reimbursed the correct amounts.”

The letters and other problems are the latest round of breakdowns as Kentucky shifted to a Medicaid managed care system from a fee for services system starting last November.

Insider Louisville, the Herald-Leader in Lexington and newspapers out in the state have documented the problems, ranging from suits accusing the MCO of not paying health care providers such as Appalachian Regional Healthcare to a decision – later rescinded – that Coventry would stop covering an opiate-withdrawal drug to notifying Louisville-based Baptist Healthcare System that Coventry intends to renegotiate for more favorable reimbursement rates and other changes.

The back story on Medicaid changes in Kentucky: In April, 2011, state officials asked health insurers to submit managed-care proposals for the $6 billion worth of care 800,000 poor and elderly Kentuckians receive annually under the federal/state Medicaid program. At the time, Gov. Steve Beshear touted the switch to managed care from fee-for-services as saving the state $375 million over the life of the initial three-year contracts. Insiders said officials in other states such as Georgia took as long as 18 months to make the change while Kentucky tried to do it in less than six months.

Berwick on Analytics: Technology Is Ready, but Doctors Need Help

Scott Mace, for HealthLeaders Media , May 15, 2012

If Marcus Welby, MD, were practicing on TV today, would he be letting data drive his decision-making? I’m on a journey to find the answer to this and related questions. Last week this journey took me to Atlanta for a HealthLeaders Media Roundtable on business intelligence and predictive analytics, and then onward to North Carolina for a conference dedicated to healthcare analytics.

While in North Carolina, I got to sit down with Don Berwick, MD, former administrator at the Centers for Medicare & Medicaid Services, and prior to that, founding CEO of the Institute for Healthcare Improvement. We talked about data analytics, but our discussion ranged far and wide around healthcare IT. Here is a portion of our conversation.

HealthLeaders Media: How far along is healthcare with its adoption of analytics?
Berwick: I certainly see the potential. At CMS we did do some early trials with Oak Ridge National Laboratory, which has tremendous data capacity. [CMS] gave them access to privacy-protected Medicare information. They have tremendous analytic capacity, and it was stunning what they did. I remember visiting Oak Ridge, and they had modeled some uses of Medicare and Medicaid data, and they were coming up with insights right away, of geographic patterns of variation that I don’t think Health Services researchers knew about.

HealthLeaders Media: Why was Oak Ridge doing this? I don’t think of them usually in this space.

Berwick: Oak Ridge is not just a Department of Energy supplier. They work with other government agencies that want to contract with them to do essentially analytics and data mining. The one place I saw analytics working was in our early work on predictive analytics for fraud. The Affordable Care Act suite of efforts to reduce fraud involves the traditional what they call pay-and-chase, which is enforcement. You find something wrong and you prosecute. We were working with the Department of Justice and the FBI and local law enforcement to catch criminals. That’s traditional and effective. You need to do it. But it’s, after all, after the horse has left the barn.

So upstream from that, there’s prevention. Make sure that the people that want to offer home healthcare or durable medical equipment, that they’re qualified to do so, they don’t have a history that makes you suspicious, and since there’s a very high concentration of fraud in certain parts of Medicare payment, one’s able to target prequalification as an area. But I thought the most promising was predictive analytics, which was take the data and turn loose the ability to go through it looking for weird patterns. The technology was ready.

Along about this time, I took a vacation with my wife in Turkey. I got online to buy a ticket for an internal flight in Turkey from Istanbul to an interior village, and I’d say a minute or two later, my cell phone rang, and it was American Express saying, “Just checking—a purchase was made in Turkey. Is this you?” Well it’s the same thing, where we can get not just retrospective but almost real-time signals. I remember the first run of predictive analytics, the volume of insights and ideas and hot spots that were spotted, it was really something.

HealthLeaders Media: I was listening to a podcast with Dr. Lynn Vogel, CIO of MD Anderson Cancer Center, who told an interviewer that the number of facts going into physicians’ decisions on treatment is growing exponentially. What’s the healthcare system going to do about that?

Berwick: It is doing [things] about it. I don’t know what Dr. Vogel meant by that comment particularly, but there are at least two meanings. One is that the science base is expanding vastly. A few years ago, I did a Google search to see how many randomized clinical trials in the world are underway right now, and the number that came up in the search was 40,000. At any one time there are 40,000 randomized trials underway. The concept that an individual human mind could possibly search through that and find out what’s relevant to your needs when I see you in my office, that obviously is folly. There has to be some intermediation of the science so that someone, some technologically supported, trusted agent is digesting that and making it available. We’re quite a way along there. We’ve had wonderful work, professionally led by the American College of Physicians and the American College of Surgeons and the cardiologists to do exactly that: intermediate between the scientific wealth and direct application. So I think that’s going okay. I’m sure it could be better. There’s been some ambivalence in public policy around this. This is the big debate about clinical effectiveness research, which is this kind of confusing question as to should we use science in decision-making? We actually are asking that question. Hopefully we’ll get over that at some point.

On the [care] delivery side, the data stream is overwhelming now. Every beep on a monitor is a data point. There are some successes. For example, Intermountain Healthcare has for years had in the ICU real-time data collection, multiple facts about a patient that can help guide action in real time. You’ll see more and more of that. I don’t think that’s conventional. I think most docs are still bathing in that kind of data without much help.

HealthLeaders Media: In all the debate about Meaningful Use, it seems to me that the incentives don’t encourage knowledge transfer from the successful innovators, like Intermountain, to those who are following.

Berwick: We’re just barely in Phase 1. The concept of meaningful use is going to grow. What doctor in the end would not want access, if it were technically available, to the answer to the question, Who does the best at this, or What does Mayo think, or Where’s the best science? We’re just in an adolescent moment in terms of evolution of that kind of knowledge transfer. Right now, my daughter is a second-year resident in medicine at the Brigham hospital in Boston. When I was in training, the message was, put it all in your head. Get it in your head. Read it, memorize it, and then spout it out at Rounds. They carry their iPhones on Rounds. So a question comes up, and they’re using their iPhones and iPads right there to get the information. Why would they store it in their head if it’s in the world? That’s a basic human factors design idea. Knowledge in the world is more useful than knowledge in the head. Young doctors and nurses are coming from a totally different mindset about access to knowledge.


Coventry Cares to resume coverage of addiction drug

Business First

Date: Tuesday, May 15, 2012, 6:41am EDT

After cutting off access to a prescription drug used to treat addiction, Kentucky Medicaid contractor CoventryCares of Kentucky has resumed coverage for the drug.

According to a report by The Courier-Journal, a Harrodsburg, Ky.-based group had threatened to sue CoventryCares — a Coventry Health Care Inc. subsidiary — over its decision to stop coverage of buprenorphin, an anti-cravings drug prescribed under the name Suboxone.

The group alleged that Coventry violated its contracts to administer the Medicaid program in Kentucky when it refused to cover the drug.

As Business First previously reported, Coventry Health Care (NYSE: CVH), which bases its state headquarters in Louisville, was one of three new companies selected last year to manage Medicaid benefits in Kentucky.

Outside Medicaid Managed Care Company Attempting to Gain Foothold in Louisville


by Kenny Colston on May 14, 2012

State officials have not yet given private Medicaid operators permission to do business in the Louisville area, but that hasn’t stopped one company from trying to make inroads.

Currently, Passport Health Plan runs Medicaid in and around Louisville. The federal government has ordered the state to open the region to competition, but the area remains closed. In anticipation of a change, United Healthcare recently sent letters to dental centers in the area, encouraging them to sign up with United once the state allows outside companies to begin operations.

United officials say the letter is just preparation to serve more Kentucky patients.

“Our understanding from information in the public domain, is that the Commonwealth of Kentucky is considering a change to its Medicaid program in Region 3. If a change in the region is made and an opportunity to serve the Medicaid population becomes available to United Healthcare, we are preparing to provide Medicaid beneficiaries with the same kind of quality healthcare programs and services received by our current 360,000 United Healthcare members in the state,” Molly McMillen, United’s director of public relations, said in a statement.

State officials declined to say whether they were aware of United’s actions. Instead they say anyone anticipating more competition in the region is relying on speculation.

Tagged as: medicaid, Passport Heath Plan, United Healthcare

Towers Watson to Acquire Extend Health in Move to Expand Retiree Benefit Services

Transaction brings together Towers Watson’s benefits expertise and experience with Extend Health’s largest private Medicare exchange, allowing employers to provide a cost-effective benefit and retirees to increase plan choice and buying power

NEW YORK & SAN MATEO, Calif., May 13, 2012 (BUSINESS WIRE) — Towers Watson (NYSE, NASDAQ: TW), a global professional services company, announced today that it has signed an agreement to acquire Extend Health, Inc., which operates the largest private Medicare exchange in the United States. We believe that this combination of two market leaders will provide innovative, best-in-class health care solutions that combine specialized retiree medical transition consulting with the choice and cost advantages of individual Medicare plans purchased on a private exchange. The two organizations announced a strategic alliance last August.

The purchase price is $435 million, less net debt and certain transaction costs. We anticipate the acquisition will be dilutive to Adjusted EPS by 2% or less in year one, and then slightly accretive in year two.

Following closing, Extend Health will operate as a new business segment within Towers Watson, joining its three existing segments of Benefits, Talent and Rewards, and Risk and Financial Services. The new Exchange Solutions segment will be led by Bryce Williams, the Co-Founder and CEO of Extend Health, and will begin with more than 300 employees and an exchange that currently works with public and private sector clients, including more than 30 Fortune 500 employers and more than 200,000 retirees.

“We are delighted that Extend Health is joining Towers Watson to provide a new way of delivering benefit packages to leading organizations,” said John Haley, CEO of Towers Watson. “This agreement brings together two forward-thinking organizations with a commitment to providing market-leading solutions to our clients. The combination of Towers Watson benefits expertise and resources, and Extend Health’s proven infrastructure and scalable exchange platform, positions us well to meet the needs of employers and retirees now and in the future.”

Recent Towers Watson research(1) found that 54% of employers with more than 1,000 employees are somewhat to very likely to reconsider their current employer-sponsored plan strategy for post-65 retirees by 2015. The Extend Health solution includes proprietary exchange and decision support technology. Its solution allows retirees the opportunity to select from thousands of private Medicare plans from more than 75 national and regional insurance companies, and employers to provide access to individual coverage, typically with a defined contribution subsidy. More employers have used Extend Health than any other company to transition their retirees to a private Medicare exchange.

“This is an important time for retiree health benefits. Both companies have a strong track record of helping employers develop strategies and create programs for employee and retiree benefits,” said Bryce Williams, CEO of Extend Health. “Our complementary strengths and strategies will allow us to hit the ground running, offering clients access to a proven, powerful and scalable exchange solution today, and to improve the landscape of employee benefits going forward.”

The transaction is subject to customary closing conditions, including clearance under the Hart-Scott-Rodino Antitrust Improvements Act, and is expected to close in less than 60 days.

BofA Merrill Lynch is acting as financial advisor and Cadwalader, Wickersham & Taft LLP as legal advisor to Towers Watson. Morgan Stanley is acting as financial advisor and Wilson Sonsini Goodrich & Rosati as legal advisor to Extend Health.