WellPoint gears up for Medicaid bonanza

Paramedics tend to a sick patient into a bed at the University of Miami Hospital's ER on April 30, 2012 in Miami, Florida. Giant health insurer Wellpoint will acquire competitor Amerigroup Corp. for nearly $5 billion in a bid for more Medicaid business.

Kai Ryssdal: It's been almost two weeks since the Supreme Court said the health care law will stand. That means the date the health care industry has had circled in red for a couple of years now still holds: 2014. When millions of people will have to buy private insurance, and millions more will be added to state Medicaid roles. For the companies who manage those Medicaid patients, that's what you call a business opportunity. Which helps explain why Wellpoint, the giant insurer, said today it's going to spend nearly $5 billion to buy rival Amerigroup.

Dan Gorenstein reports from New Hampshire Public Radio. 


Dan Gorenstein: In 2010, states and the federal government spent $404 billion on Medicaid, the health program for the poor. WellPoint expects that to grow by $100 billion in just two and a half years.

Len Nichols: It's a great time to get into the Medicaid market, if you know what you are doing. It's not for any old farmer from Arkansas, where I grew up.

That's Len Nichols, a health economist at George Mason University.


See how much your state will spend under expanded Medicaid. View an Interactive Map

The reason WellPoint acquired Amerigroup is because Amerigroup knows how to manage Medicaid patients, which is a complicated way of saying Amerigroup and firms like it know how to save states money.

Paul Ginsburg with the Center for Studying Health System Change says in today's health care landscape -- shrinking dollars and soaring costs -- that's worth its weight in gold.

Paul Ginsburg: When you combine the revenue constraints with growing enrollments this has really increased states interest to do whatever they can think of to try and reduce costs.

So what states are doing is putting some of their sickest and most expensive patients into managed care programs.

Alan Weil, the head of the National Academy of State Health Policy says what states need to think about is that many companies don't have a track record with those patients.

Alan Weil: There's a tremendous risk here, and there is a tremendous upside. And that's what makes this such a tough time.

Weil says WellPoint and state governments must understand they will handle medically fragile people with high costs. But he adds, those high costs open the door to potentially save -- and make -- lots of money.

I'm Dan Gorenstein for Marketplace.

About the author

Dan Gorenstein is the senior reporter for Marketplace’s Health Desk. You can follow him on Twitter @dmgorenstein.

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