Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Old, Sick, and Poor: Health Care’s Most Expensive Patients – UnitedHealth Group Inc. (UNH), Humana Inc (HUM), WellPoint, Inc. (WLP)

Health care is about to change for a patient population called “the poorest and the sickest” by the Kaiser Family Foundation.

Spend enough time reading about Medicare or Medicaid and you will see the term “dual-eligible,” which refers to people who qualify for both programs due to low income combined with chronic illness or disability. Dual-eligible patients represent a small percentage of both programs but amount to a much higher chunk of overall costs.

The Affordable Care Act has provisions aimed at streamlining this system and some trial programs to begin next month. But profits still await private insurers — if they’re willing and able to take the risk.

UnitedHealth Group IncFinding footing
Dual-eligible patients typically have Medicare as the primary payer for general health care costs, which include doctor and hospital visits and prescription drugs. Medicaid steps in to help cover Medicare costs and plug any gaps in that primary coverage. The costs of treating dual-eligible patients are disproportionately high. While only 15% of Medicaid patients qualify for Medicare, those patients represent 36% of total Medicaid spending, according to the KFF.

The higher costs offer an opportunity for insurer profits, assuming the company doesn’t mind taking on a patient population known for poorer health.

Private insurers need a presence in the Medicare and Medicaid markets to benefit fully from dual-eligible patients. The first checkmark is easier to mark off; most of the leading insurers have a Medicare Advantage or Part D program kicking around. But fewer have a strong Medicaid program already in place.

An exception to the rule is UnitedHealth Group Inc. (NYSE:UNH). The company’s Medicare & Retirement segment included 2.6 million Medicare Advantage members, which helped contribute to $39 billion in revenues in its Medicare & Retirement segment last year. Community & State had 3.8 million Medicaid beneficiaries and revenues of $16.4 billion. According to UnitedHealth, these patient numbers include about 250,000 with dual eligibility.

UnitedHealth’s current strength came from its 2012 acquisition of XLHealth — a leader in Medicare Advantage that primarily focused on dual-eligible patients. Other insurers have also tried to secure stronger footing through acquisitions or partnerships.

Humana Inc (NYSE:HUM) had $25 billion in premium revenues for individual Medicare Advantage beneficiaries from about 2.2 million members. The company’s Medicaid presence was lacking before collaborating with CareSource, a provider with around 900,000 enrollees in Ohio and Michigan.

WellPoint, Inc. (NYSE:WLP) spent $800 million on CareMore Health Group, which owned a number of health care clinics tailored to older patients and maintained Medicare Advantage plans. But it was WellPoint’s multi-billion dollar acquisition of Amerigroup last year that boosted the company’s Medicaid enrollment to 4.5 million patients across 20 states. WellPoint, Inc. (NYSE:WLP) affiliates also announced an expansion of its Medicare offerings last year to increase coverage in eight states.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.