AEI’s J.D. Kleinke has a long, eye-opening Forbes piece on the latest fads and foibles in the health care market. Aetna and Wellpoint have been buying up health (managed) care providers that principally service Medicaid populations. The valuations are rich: Wellpoint paid a 50 percent market price premium and about 18.4 forward PE for Amerigroup.
Behind this “Fools’ Gold Rush” is, of course, the Affordable Care Act, which (if implemented) will unleash mass migrations on a scale last seen when the frontier was still open—for example, from private and state plans into “exchanges” or Medicaid. Among the migrants are an estimated 9 million “dual covered” folks who are currently covered under Medi-care and –caid and will eventually be moved entirely into Medicaid. With something like $300 billion in revenues on the table, the betting is that there’s money to be made in that market. But how?
