A few weeks ago, Amerigroup (AGP), a managed healthcare company focused primarily in public health plan membership, disclosed that it is experiencing organic membership gains across all markets, and with this, increased outpatient utilization.  Due to the weak economy, members that were previously ineligible for Medicaid are now meeting criteria and causing an increase in AGP’s medical claims costs.  While I recognize that new members will have a upward push on utilization, I think it is premature to conclude that this is detrimental news to the stability of Amerigroup, or similar companies such as Centene, Molina, and Wellcare.

Many of these newly covered lives are individuals or families that were previously ineligible for Medicare because they income bracket was above the ‘poverty line’ set forth by criteria.  As PGR’s network of Medicaid professionals convey, there is a clear correlation of where you sit on the poverty line and your health and utilization trend.  Historical data confirms that higher economic brackets tend to be healthier and incur less high-cost claims.  These new members, many previously employed and working, are likely a healthier group than the ‘traditional’ Medicaid member.  Although AGP is experiencing an increase in Outpatient costs due to new qualifying members, it is more likely a short-term, one-time glitch due to pent up demand.  Because Managed Medicaid reimbursement is distributed on a per member, per month basis, AGP could actually stand to benefit higher profit margins from this group, if three to six months down the road, they are still qualified for Medicaid and the utilization, through pent up demand, has calmed back to norm.

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