(Reuters) - President Barack Obama’s plan to extend health coverage to millions of poor Americans remains highly contentious, yet it is gaining momentum among several initially reluctant states where financial pragmatism is trumping ideology.

Up to a dozen states, including several led by Republicans, could move forward with plans to expand coverage under Medicaid after the November elections. They take their cue from Pennsylvania and other states that have won Washington's approval to add commercial innovations to the 50-year-old government program to make it more palatable to conservatives.

Obama's original idea of using tax money to expand Medicaid has long been a hot button for Republicans who portray the whole Obamacare healthcare overhaul as a form of socialism encroaching on American values of free enterprise and self-reliance. Texas Governor Rick Perry once said expanding Medicaid would be similar to "adding a thousand people to the Titanic.”

But two things have led to a change of heart for some Republican politicians.

Most of the 27 states that are already expanding the program have begun to reap billions in federal subsidies for insurers, hospitals and healthcare providers, putting politicians elsewhere under intense pressure to follow suit.

As demonstrated by Pennsylvania's deal with Washington, the Obama administration has also proved willing to accept tweaks that give the private sector a greater role in providing healthcare and place new responsibilities on beneficiaries.

All of that has got as many as nine states talking to the administration about potential expansion terms, with the possibility of up to three more joining the fray depending on November's election outcomes. As a result, there could be even more pressure on Republican states that have opted out, providing critical mass for an initiative central to Obamacare.

Heading into the final two years of his presidency, Obama wants to cement his legacy, a big part of which is his pledge to reduce the number of uninsured Americans.

NEW WAVE

“Pennsylvania’s the leading edge of what could be a new wave of expanding states,” said Deborah Bachrach, a Medicaid expert at the law and consulting firm Manatt, Phelps & Phillips.

“This would marginalize the non-expansion states to the considerable detriment of their citizens and put pressure on those who oppose expansion,” she said.

Some states with Republican governors, such as Indiana, are negotiating with Washington for agreements that could pass political muster with conservatives back home. Others such as North Carolina, South Dakota and Wyoming are exploring options.

In Florida, Wisconsin and Maine, the outcome of the Nov. 4 election could bring a shift on Medicaid if Democrats win gubernatorial races there.

Administration officials have said they are committed to working with all states to expand the scheme and noted that the number of the uninsured has declined much more in states that have expanded Medicaid coverage.

A possible new wave of expansion comes as prospects for the broad Obamacare reform are also looking up. After a rocky start a year ago, research suggests that more than 10 million people have gained health coverage under the law.

But that momentum could get lost if Republicans win control of the U.S. Senate and begin pressuring Obama to scale back the reform.

Pennsylvania's turbulent journey into the Medicaid fold offers a possible template for others, including the possibility of a political reversal if Republican Governor Tom Corbett loses his reelection bid. In polls, he is well behind Democratic challenger Tom Wolf, who favors expanding Medicaid and keeping its traditional structure intact.

Corbett, who took part in a Supreme Court challenge to the Medicaid expansion, had opposed enlarging a government program without substantial change. A pro-Medicaid coalition of more than 100 groups responded with intense lobbying during the budget approval process in early 2013.

“We had advocacy days, drive-ins, invited lawmakers in to talk about what’s important, encouraged people to talk to their local chambers of commerce and organized educational opportunities,” said Paula Bussard, policy chief at the Hospital & Healthsystem Association of Pennsylvania, which represents 250 institutions.

A study by the RAND Corp predicted a $3 billion economic boost and the creation of 35,000 jobs – big advantages for a state that has struggled for decades to make up for jobs lost from the decline of the coal and steel industries.Corbett met in Washington with former U.S. Health and Human Services Secretary Kathleen Sebelius in April 2013 and a year of intensive talks followed.

Pennsylvania won approval for only a handful of the two dozen innovations it sought, such as permission to offer benefits through private insurers and impose premium charges on beneficiaries who earn more than the federal poverty level.

The program will also include incentives for beneficiaries to practice healthy behavior including screenings and set benefit packages according to commercial standards.

Pennsylvania officials say that while a compromise proved possible, that did not mean convergence in political positions.

“The administration comes from a different philosophical background,” said Jennifer Branstetter, Corbett’s policy chief. “They want to make sure that the program’s there for everybody. And we want to make sure it’s there if you need it."

Other Republican-led states hope the Obama administration will allow even greater flexibility.

“The hope is that they'll be less interested in the purity of their original vision and be more interested in cutting deals to get some of these things done," said Tony Venhuizen, spokesman for South Dakota’s Republican Governor Dennis Daugaard, who has been open to a Medicaid expansion.

In some states, pro-expansion politicians are trying to win conservative support by pushing market-based innovations that over time could trim the cost of traditional Medicaid.

"Eventually, they could meld together," said Nebraska Senator Kathy Campbell, a Republican who has helped lead discussions with Washington.

But while the turning tide on Medicaid bodes well for Obamacare, Republicans refuse to concede any points in the ideological battle around the healthcare model.

(Reuters) - Your medical information is worth 10 times more than your credit card number on the black market.

Last month, the FBI warned healthcare providers to guard against cyber attacks after one of the largest U.S. hospital operators, Community Health Systems Inc, said Chinese hackers had broken into its computer network and stolen the personal information of 4.5 million patients.

Security experts say cyber criminals are increasingly targeting the $3 trillion U.S. healthcare industry, which has many companies still reliant on aging computer systems that do not use the latest security features.

"As attackers discover new methods to make money, the healthcare industry is becoming a much riper target because of the ability to sell large batches of personal data for profit," said Dave Kennedy, an expert on healthcare security and CEO of TrustedSEC LLC. "Hospitals have low security, so it's relatively easy for these hackers to get a large amount of personal data for medical fraud."

Interviews with nearly a dozen healthcare executives, cybersecurity investigators and fraud experts provide a detailed account of the underground market for stolen patient data.

The data for sale includes names, birth dates, policy numbers, diagnosis codes and billing information. Fraudsters use this data to create fake IDs to buy medical equipment or drugs that can be resold, or they combine a patient number with a false provider number and file made-up claims with insurers, according to experts who have investigated cyber attacks on healthcare organizations.

Medical identity theft is often not immediately identified by a patient or their provider, giving criminals years to milk such credentials. That makes medical data more valuable than credit cards, which tend to be quickly canceled by banks once fraud is detected.

Stolen health credentials can go for $10 each, about 10 or 20 times the value of a U.S. credit card number, according to Don Jackson, director of threat intelligence at PhishLabs, a cyber crime protection company. He obtained the data by monitoring underground exchanges where hackers sell the information.

 

ATTACKS ON THE RISE

The percentage of healthcare organizations that have reported a criminal cyber attack has risen to 40 percent in 2013 from 20 percent in 2009, according to an annual survey by the Ponemon Institute think tank on data protection policy.

Founder Larry Ponemon, who is privy to details of attacks on healthcare firms that have not been made public, said he has seen an increase this year in both the number of cyber attacks and number of records stolen in those breaches.    

Fueling that increase is a shift to electronic medical records by a majority of U.S. healthcare providers.

Marc Probst, chief information officer of Intermountain Healthcare in Salt Lake City, said his hospital system fends off thousands of attempts to penetrate its network each week. So far it is not aware of a successful attack.

"The only reason to buy that data is so they can fraudulently bill," Probst said.

Healthcare providers and insurers must publicly disclose data breaches affecting more than 500 people, but there are no laws requiring criminal prosecution. As a result, the total cost of cyber attacks on the healthcare system is difficult to pin down. Insurance industry experts say they are one of many expenses ultimately passed onto Americans as part of rising health insurance premiums.

Consumers sometimes discover their credentials have been stolen only after fraudsters use their personal medical ID to impersonate them and obtain health services. When the unpaid bills are sent on to debt collectors, they track down the fraud victims and seek payment.    

Ponemon cited a case last year in which one patient learned that his records at a major hospital chain were compromised after he started receiving bills related to a heart procedure he had not undergone. The man's credentials were also used to buy a mobility scooter and several pieces of medical equipment, racking up tens of thousands of dollars in total fraud.

MEDICARE FRAUD

The government's efforts to combat Medicare fraud have focused on traditional types of scams that involve provider billing and over billing. Fraud involving the Medicare program for seniors and the disabled totaled more than $6 billion in the last two years, according to a database maintained by Medical Identity Fraud Alliance.

"Healthcare providers and hospitals are just some of the easiest networks to break into," said Jeff Horne, vice president at cybersecurity firm Accuvant, which is majority-owned by private equity firm Blackstone Group.

"When I've looked at hospitals, and when I've talked to other people inside of a breach, they are using very old legacy systems - Windows systems that are 10 plus years old that have not seen a patch."

KPMG partner Michael Ebert said security has been an afterthought for many medical providers - whether it is building encryption into software used to create electronic patient records or in setting budgets.

"Are you going to put money into a brand new MRI machine or laser surgery or are you going to put money into a new firewall?" he said.

(Reuters) - Leaders of some of the biggest U.S. corporations, from Coca-Cola Co (KO.N) to Johnson & Johnson (JNJ.N), unveiled a campaign on Tuesday to reduce the nation's healthcare costs, urging their peers to embrace wellness programs to improve employee health.

The newly-formed group, called The CEO Council on Health and Innovation, said it came together "to lead the U.S. business community" in improving employee and community health and reducing costs.

The council's members also include executives from Verizon Communications Inc (VZ.N), Aetna Inc (AET.N), Bank of America Corp (BAC.N), Walgreen Co (WAG.N), McKinsey & Co, Blue Cross and Blue Shield Association and Institute for Advanced Health. Combined, the group said its healthcare benefits cover 150 million people.

In a report released at a press conference in Washington, D.C. in conjunction with the Bipartisan Policy Center, the council called on employers to accelerate the adoption of comprehensive wellness programs that aim to improve nutrition and weight management, promote physical activity, help employees quit smoking and manage chronic diseases.

The group also called on employers to make more use of incentives to increase employee adoption of wellness programs and to modify their health benefits in a way that would encourage workers to take preventive measures to improve health.

Workplace wellness programs, a $6 billion-a-year industry, are a favorite of the business community because they promise to improve productivity, cut absenteeism and reduce medical costs by averting expensive illnesses.

Some employers offer their workers monetary incentives to adhere to the plans, while a smaller group of companies and organizations are introducing penalties for not complying with wellness initiatives.

Several chief executives on the council described their wellness initiatives and cited success in reducing costs for both the employees and the company.

But some research has shown such programs do not always cut costs as hoped.

A long-running workplace wellness program at PepsiCo (PEP.N), for example, helped reduce costs for workers with chronic diseases by cutting down hospital admissions. But the savings for employees who were urged to make preventive changes to their lifestyle were negligible, according to a report published in January.