Bloomberg News

UnitedHealth Says Medicaid Changes May Save Cash

April 15, 2010

UnitedHealth Group Inc. (UNH:US), the biggest U.S. health insurer by sales, said the Medicaid program could save $366 billion over a decade by enrolling more of the poor in private managed-care plans.

Putting more long-term care patients in managed care may save the U.S. and state governments $140 billion over a decade and modernizing computer and administrative systems may save $133 billion, the company said in a report today. The Minnetonka, Minnesota-based insurer is the largest private provider of Medicaid benefits, which cover the poor, followed by Indianapolis-based WellPoint (WLP:US) Inc. and Amerigroup Corp. (AGP:US) of Virginia Beach, Virginia.

Expanding Medicaid would cover about half of the 32 million uninsured Americans affected by the health-care overhaul signed by President Barack Obama, the Congressional Budget Office projected last month. Savings in the joint federal-state program would help states facing budget shortages amid the recession and doctors who say the program pays them too little, UnitedHealth’s report said.

“There is actually an opportunity to generate savings out of the Medicaid program and put that back into primary care,” said Simon Stevens, a UnitedHealth executive vice president, in a conference call with reporters. “We think there is a circle that can be squared here.”

UnitedHealth Customers

UnitedHealth oversees Medicaid benefits for about 3 million people in 25 states, Stevens said.

The expansion, due to start in 2014, may generate $81 million a year in additional operating profit for UnitedHealth and $48 million for WellPoint, said Ana Gupte, a Sanford C. Bernstein & Co. analyst, in a March 31 note to clients. The added earnings would be tempered by new taxes and rules that cut profit margins on commercial accounts, she said.

UnitedHealth fell 42 cents, or 1.4 percent, to $30.63 at 4:02 p.m. in New York Stock Exchange composite trading (UNH:US). The shares have dropped 8 percent since March 22, the day after the U.S. House approved the health-care overhaul.

The legislation already takes some of the steps UnitedHealth suggests, Nicholas Papas, a spokesman for the U.S. Health and Human Services Department, said in an e-mail. The agency is drafting rules to implement the health-care law.

Among the changes, the law requires insurers to simplify administrative procedures for doctors, includes a two-year boost in Medicaid rates for physicians and encourages more coordinated care for people with chronic medical conditions, he said.

“The new health reform law provides unprecedented support to states and takes significant steps to strengthen Medicaid, consistent with initiatives that have been under way across the country,” Papas said.

To contact the reporter on this story: Alex Nussbaum in New York

To contact the editor responsible for this story: Reg Gale at

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