News Release

Contact:

Juan José Orellana
Investor Relations

562-435-3666, ext. 111143

MOLINA HEALTHCARE REPORTS

FOURTH QUARTER AND 2007 YEAR-END RESULTS

Long Beach, California (February 13, 2008) – Molina Healthcare, Inc. (NYSE: MOH) today announced its financial results for the fourth quarter and year ended December 31, 2007.

Net income for the quarter ended December 31, 2007, increased to $17.9 million, or $0.63 per diluted share, compared with net income of $11.6 million, or $0.41 per diluted share, for the quarter ended December 31, 2006.

Net income for the year ended December 31, 2007, increased to $58.3 million, or $2.05 per diluted share, compared with net income of $45.7 million, or $1.62 per diluted share, for 2006.

“As indicated by our year-end results, 2007 was a year of accomplishment and growth.  We’re pleased with our 28% growth in net income as a result of higher revenues and improved medical care costs,” said J. Mario Molina, M.D, president and chief executive officer of Molina Healthcare.  “The successful integration of the Missouri health plan, the managed care expansion in Missouri and improved utilization of services in our Ohio and Texas health plans position our company to continue to deliver strong revenue growth and manage medical costs in 2008.”

Earnings Per Share Guidance

The Company confirms the guidance it had issued on January 22, 2008, for earnings per diluted share for fiscal year 2008 in the range of $2.25 to $2.45.

Financial Results – Comparison of Quarters Ended December 31, 2007 and 2006

Premium revenue for the fourth quarter of 2007 was $670.6 million, an increase of $126.7 million, or 23.3%, over premium revenue of $543.9 million for the fourth quarter of 2006.  Medicare premium revenue for the fourth quarter of 2007 was $17.2 million compared with $8.2 million in the fourth quarter of 2006.

Contributing to the $126.7 million increase in quarterly premium revenues were the following:

·   A $79.2 million increase at the Ohio health plan principally due to higher enrollment.

·   A $30.7 million increase as a result of the acquisition of Mercy CarePlus in Missouri effective October 31, 2007.

·   A $23.5 million increase at the New Mexico health plan due to higher enrollment, higher premium rates and a decrease in the premium adjustment associated with a minimum medical care ratio contract provision.

·   A $19.8 million increase at the Texas health plan due to higher enrollment.  During the fourth quarter of 2007, the Texas health plan reduced revenue by $2.1 million to record amounts due back to the state under a profit sharing agreement.

·   A $10.7 million increase at the Washington health plan due to higher premium rates and slightly higher membership.

·   A $5.2 million increase at the California health plan as increased premium rates offset lower enrollment.  The California health plan added approximately 4,300 members as a result of an acquisition in Sacramento effective November 1, 2007.

These increases in premium revenues were partially offset by the following:

·   A $28.1 million decrease due to the termination of operations at the Company’s Indiana health plan effective January 1, 2007.

·   A $10.3 million decrease at the Utah health plan due to reduced membership and the write-off of $3.0 million in savings share receivables.  The Utah savings share receivable, which had been $4.0 million at December 31, 2006 and $4.7 million at June 30, 2007, was reduced to zero at December 31, 2007.

·   A $6.0 million decrease at the Company’s Michigan health plan due to lower enrollment, partially offset by higher premium rates.

Medical care costs as a percentage of premium revenue (the medical care ratio) decreased to 83.6% in the fourth quarter of 2007 from 85.1% in the fourth quarter of 2006, an improvement of 150 basis points year-over-year.  Sequentially, the medical care ratio decreased from 83.7% for the quarter ended September 30, 2007, an improvement of 10 basis points.

·   The medical care ratio of the California health plan decreased as a result of premium increases received during 2007 in San Bernardino/Riverside, San Diego and Sacramento counties.  These rate increases more than offset an increase in PMPM medical costs of approximately 1%, lowering the California medical care ratio from 89.3% in the fourth quarter of 2006 to 82.8% in 2007.

·   The medical care ratio of the Michigan health plan increased due to higher capitation, pharmacy and specialty fee-for-service costs, partially offset by lower hospital fee-for-service costs.  The medical care ratio of the Michigan health plan increased to 84.4% in the fourth quarter of 2007 from 78.6% in fourth quarter of 2006.

·   The medical care ratio of the New Mexico health plan decreased during 2007 due to higher premium rates and a reduction in the premium adjustment associated with a minimum medical care ratio contract provision, partially offset by the impact of Medicaid fee schedule increases.  Medical care costs in the fourth quarter of 2007 include $2.0 million paid for provider incentives.  Absent the adjustments made to premium revenue in the fourth quarter of 2007 and 2006, the medical care ratio in New Mexico would have been 82.0% in the fourth quarter of 2007 and 75.8% in the fourth quarter of 2006.

·   The medical care ratio for the Ohio health plan’s Covered Families and Children (CFC) population decreased to 86.2% in the fourth quarter of 2007 from 88.6% in the fourth quarter of 2006.  The medical care ratio for the aged blind and disabled (ABD) population was 97.0% in the fourth quarter of 2007.  The Ohio health plan had no ABD membership in the fourth quarter of 2006.  The medical care ratio of the Ohio health plan increased to 90.3% from 88.6% in the fourth quarter of 2006 due to the addition of the ABD population in 2007.  The Company expects that the Ohio ABD medical care ratio will decrease in 2008 as a result of the 2.6% rate increase the health plan received under its ABD contract with the state effective January 1, 2008, and the realization of improved utilization as the transition to managed care continues.  The recent addition of the ABD members (some of whom were not added until late summer of 2007) adds a degree of uncertainty to the medical care cost estimates in Ohio that is not found in the Company’s more mature health plans.  The Company estimates that if the 2008 medical care ratio for the CFC population remains at 86.2% for all of 2008, the Company will need to achieve a medical care ratio of 91.0% for its ABD population to reach its previously announced expectation of an 88.0% medical care ratio plan-wide.

·   The medical care ratio of the Company’s Texas health plan decreased primarily due to very low medical costs for the Star Plus membership.  As noted above, the Company recorded a $2.1 million profit sharing liability at December 31, 2007, as a result of low medical cost expense in Texas.  The Company does not believe that the medical care ratio reported by the Texas health plan in the fourth quarter of 2007 is sustainable and expects the medical care ratio to rise during 2008 to a level consistent with consolidated results.

·   The medical care ratio of the Company’s Utah health plan increased due to the write-off of a $3.0 million savings share receivable.  Medical care costs in Utah decreased on a PMPM basis in the fourth quarter of 2007 when compared with the fourth quarter of 2006.  Absent the out-of-period write-off of $3.0 million in savings share receivable in the fourth quarter of 2007, the Utah health plan’s medical care ratio would have been 90.2%, an improvement over the 91.8% ratio reported in the fourth quarter of 2006.  The Company’s Utah health plan serves the majority of its membership under a cost-plus contract with the State of Utah.

·   The medical care ratio reported at the Company’s Washington health plan decreased to 77.9% in the fourth quarter of 2007 from 79.5% in the fourth quarter of 2006.  Fee-for-service specialist costs and pharmacy costs as a percentage of premium revenue were lower in the fourth quarter of 2007 than in the fourth quarter of 2006.

·   The termination of the Company’s operations in Indiana benefited the medical care ratio in the fourth quarter of 2007.  Absent the impact of the Indiana plan, the medical care ratio would have decreased by 90 basis points in the fourth quarter of 2007 to 83.7% from 84.6% in the fourth quarter of 2006.

Days in medical claims and benefits payable were 52 days at December 31, 2007, 54 days at September 30, 2007, and 57 days at December 31, 2006.

The Company had previously disclosed its expectation that days in medical claims and benefits payable would decline as it began paying claims associated with the Ohio and Texas start-up health plans that previously had been reported as part of the Company’s incurred but not reported claims liability.

The Company had also previously disclosed that claims were being paid more quickly during 2007.

·   Billed charges in claims inventory (as measured by the total billed charges for all claims received but not processed) declined by approximately 25% between December 31, 2006 and December 31, 2007.

·   Billed charges in claims inventory (as measured by the total billed charges for all claims received but not processed) declined by approximately 9% between September 30, 2007 and December 31, 2007.

The Company had also previously disclosed that a shift towards capitated provider contracts would reduce days in medical claims and benefits payable.  Capitation costs were 18.0% of total medical costs for 2007, and only 15.6% of total medical costs for 2006.

If capitation costs and liabilities are removed from the calculation, days in medical claims and benefits payable were 59 days at December 31, 2007, 61 days at September 30, 2007, and 64 days at December 31, 2006.

General and administrative expenses were $80.5 million, or 11.8% of total revenue, for the fourth quarter of 2007 compared with $61.0 million, or 11.1% of total revenue, for the fourth quarter of 2006.

Core G&A expenses (defined as G&A expenses less premium taxes) increased to 8.8% of revenue in the fourth quarter of 2007 compared with 7.9% in the fourth quarter of 2006.

The increase in core G&A in comparison to the fourth quarter of 2006 is primarily the result of increases to employee incentive compensation accruals as a result of the Company’s improved financial performance in 2007, as well as the Company’s continued investment in the administrative infrastructure necessary to support its Medicare product line and additional employee recruitment costs.  The following table details the impact of these costs on Core G&A expense in the fourth quarters of 2007 and 2006:

(in thousands)	2007					2006
			% of Total						% of Total
	Amount		Revenue			Amount			Revenue
Medicare-related administrative costs	$	3,760		0.5	%	$	1,335			0.2	%
Non Medicare-related administrative costs:
Employee recruitmentexpense		1,165		0.2	%		123			0.0	%
Employee incentive compensation		2,728		0.4	%		(1,898	)		(0.3	%)
All other administrative expense		52,096		7.7	%		44,111			8.0	%
Core G&A expenses	$	59,749		8.8	%	$	43,671			7.9	%

Financial Results – Comparison of Year Ended December 31, 2007 and 2006

Premium revenue for the year ended December 31, 2007, was $2,462.4 million, an increase of $477.3 million, or 24.0%, over premium revenue of $1,985.1 million for the year ended December 31, 2006.  Medicare premium revenue for 2007 was $49.3 million compared with $27.2 million in 2006.

Contributing to the $477.3 million increase in annual premium revenues were the following:

·   A $341.5 million increase at the Ohio health plan principally due to higher enrollment.

·   An $83.9 million increase at the Texas health plan due to higher enrollment.  During 2007, the Texas health plan reduced revenue by $3.1 million to record amounts due back to the state under a profit sharing agreement.

·   A $57.2 million increase at the Company’s Michigan health plan, principally due to the acquisition of Cape Health Plan effective May 1, 2006.

·   A $46.5 million increase at the New Mexico health plan due to higher enrollment and higher premium rates.  The New Mexico health plan reduced revenue by $6.0 million and $6.9 million in 2007 and 2006, respectively, to meet a contractually required minimum medical care ratio.

·   A $39.2 million increase at the Washington health plan due to higher premium rates and slightly higher membership.

·   A $30.7 million increase as a result of the Company’s acquisition of Mercy CarePlus in Missouri effective October 31, 2007.

·   A $6.9 million increase at the California health plan as increased premium rates offset lower enrollment.

These increases in premium revenues during 2007 were partially offset by:

·   An $82.9 million decrease due to the termination of operations at the Company’s Indiana health plan effective January 1, 2007.

·   A $48.6 million decrease at the Utah health plan due to reduced membership and the write-off of $4.7 million in savings share receivables.

Medical care costs as a percentage of premium revenue (the medical care ratio) decreased to 84.5% in the year ended December 31, 2007, from 84.6% in 2006.

·   The medical care ratio of the California health plan decreased to 81.9% in 2007 from 88.3% in 2006 as a result of the premium increases received during 2007 in San Bernardino/Riverside, San Diego and Sacramento counties.  PMPM medical costs were essentially flat.

·   The medical care ratio of the Michigan health plan increased to 84.0% in 2007 from 78.1% in 2006 due to higher capitation and pharmacy and specialty fee-for-service costs, partially offset by lower hospital fee-for-service costs.

·   The medical care ratio of the New Mexico health plan decreased to 82.6% for all of 2007 from 84.6% in 2006.  The decrease was the result of higher premium rates and a reduction in the minimum medical care ratio premium adjustment, partially offset by the impact of Medicaid fee schedule increases.  Absent the adjustments made to premium revenue in 2007 and 2006, the medical care ratio in New Mexico would have been 80.8% in 2007 and 82.0% in 2006.

·   The medical care ratio of the Ohio health plan decreased to 90.4% for 2007 from 91.0% in 2006.  The medical care ratio for the Ohio health plan’s CFC population decreased to 88.5% in 2007 compared with 91.0% in 2006.  During 2007, the Ohio health plan began serving the ABD population for the first time.  The medical care ratio for the ABD population for all of 2007 was 94.7%.  The Company expects that the Ohio ABD medical care ratio will decrease in 2008 as a result of the 2.6% rate increase the health plan received under its ABD contract with the state effective January 1, 2008, and the realization of improved utilization as the transition to managed care continues.  The recent addition of the ABD members (some of whom were not added until late summer of 2007) adds a degree of uncertainty to the medical care cost estimates in Ohio that is not found in the Company’s more mature health plans.

·   The medical care ratio of the Company’s Texas health plan decreased in 2007 primarily due to very low medical costs for the Star Plus membership.  As noted above, the Company recorded a $3.1 million reduction to revenue in Texas during 2007 to reflect estimated amounts due back to the state under a profit sharing arrangement.  The Company does not believe that the medical care ratio reported by the Texas health plan in 2007 is sustainable and expects the medical care ratio to rise during 2008 to a level consistent with consolidated results.

·   The medical care ratio of the Company’s Utah health plan increased due to the write-off of $4.7 million in savings share receivables in the second half of 2007.  Medical care costs in Utah decreased on a PMPM basis in 2007 when compared with 2006.  Absent the out-of-period write-off of $4.7 million in savings share receivable in the second half of 2007, the Utah health plan’s medical care ratio would have been 90.4%, an improvement over the 91.5% reported for 2006.  The Company’s Utah health plan serves the majority of its membership under a cost-plus contract with the State of Utah.

·   The medical care ratio reported at the Company’s Washington health plan increased to 79.6% in 2007 from 78.9% in 2006, principally due to higher fee-for-service costs.

·   The termination of the Company’s operations in Indiana resulted in a 10 basis point improvement in the Company’s medical care ratio to 84.5% in 2007.  Absent the impact of the Indiana plan in both years, the Company’s consolidated medical care ratio in 2007 would have increased 50 basis points to 84.6% from 84.1% in 2006.

General and administrative expenses were $285.3 million, or 11.5% of total revenue, for the year ended December 31, 2007, compared with $229.1 million, or 11.4% of total revenue, in 2006.

Core G&A expenses decreased to 8.2% of total revenue for the year ended December 31, 2007, compared with 8.4% in 2006.

As noted above, the Company has incurred in 2007 higher employee incentive compensation, Medicare administrative and recruitment costs.  The following table details the impact of these costs on Core G&A expense in 2007 and 2006:

(in thousands)	2007					2006
			% of Total					% of Total
	Amount		Revenue			Amount		Revenue
Medicare-related administrative costs	$	9,778		0.4	%	$	3,237		0.2	%
Non Medicare-related administrative costs:
Employee recruitment expense		2,568		0.1	%		1,769		0.1	%
Employee incentive compensation		9,976		0.4	%		5,102		0.2	%
All other administrative expense		182,736		7.3	%		158,172		7.9	%
Core G&A expenses	$	205,058		8.2	%	$	168,280		8.4	%

Cash Flow

Cash provided by operating activities for the year ended December 31, 2007, was $158.0 million, compared with $102.3 million for the same period in 2006, an increase of $56.0 million.  Cash provided by operating activities was $45.2 million for the quarter.  The primary sources of cash provided by operating activities were net income, depreciation and amortization, and deferred revenue at the Company’s Ohio health plan.

On a consolidated basis, at December 31, 2007, the Company had cash and investments (exclusive of restricted investments) of approximately $701.9 million.  The parent company had cash and investments of approximately $98.3 million.

During the fourth quarter of 2007, the Company issued $200 million in senior convertible notes.  A portion of the net proceeds from the issuance of the notes was used to pay off the $20.0 million owed on the Company’s credit facility at September 30, 2007.  During the fourth quarter, the Company paid approximately $80.0 million to acquire Mercy CarePlus, its Missouri health plan.  Subsequent to the acquisition, the Company contributed another $7.0 million to the Missouri health plan to fund regulatory capital requirements.  Also during the fourth quarter, the Company contributed $32.5 million to its Ohio health plan to fund its regulatory capital requirements and contributed an additional $5.4 million in total to several other of the Company’s health plans.

Conference Call

The Company’s management will host a conference call and webcast to discuss its fourth quarter and year-end results at 5:00 p.m. Eastern Time on Wednesday, February 13, 2008.  The telephone number for this interactive conference call is 212-231-2900, and the live webcast of the call can be accessed on the Company’s website at www.molinahealthcare.com, or at www.earnings.com.  An online replay will be available beginning approximately one hour following the conclusion of the call and webcast.

Molina Healthcare, Inc. is a multi-state managed care organization that arranges for the delivery of health care services to persons eligible for Medicaid, Medicare, and other government-sponsored programs for low-income families and individuals.  Molina Healthcare’s nine licensed health plan subsidiaries in California, Michigan, Missouri, Nevada, New Mexico, Ohio, Texas, Utah, and Washington currently serve approximately 1.1 million members.  More information about Molina Healthcare can be obtained at www.molinahealthcare.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This press release contains “forward-looking statements” identified by words such as “will,” “believes,” “expects” or ”expectations,” “anticipates,” “plans,” “projects,” “estimates,” “intends,” and similar words and expressions.  In addition, any statements that explicitly or implicitly refer to earnings guidance, expectations, projections, or their underlying assumptions, or other characterizations of future events or circumstances, are forward-looking statements.  All of our forward-looking statements are based on our current expectations and assumptions which are subject to numerous known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially.  Such factors include, without limitation, risks related to: the successful management of our medical costs and the achievement of our projected medical care ratios in all health plans in 2008, including the continuing reduction of the medical care ratio of our Ohio health plan; the achievement of projected growth in both Medicaid and Medicare enrollment; increased administrative costs in support of the Company's efforts to expand its Medicare membership; risks related to our more limited experience with Ohio, Texas, and dual eligible members and attendant claims estimation difficulties; funding decreases in the Medicaid, Medicare, or SCHIP programs or the failure to fully fund the SCHIP program; the budget crisis in California and the pressure to reduce provider rates in that state, including current PMPM rates under our existing contracts; the securing of projected premium rate increases for 2008 that are consistent with our expectations, in particular in the states of Michigan, Missouri, and Texas; our ability to accurately estimate incurred but not reported medical costs across all health plans; the successful renewal and continuation of the government contracts of all of our health plans; the acceptance by the State of New Mexico of the contract bid of our New Mexico health plan for the new Salud! Medicaid contract; the realization of projected income from invested cash balances; the successful and cost-effective integration of our acquisitions; earnings seasonality consistent with our expectations; the availability of adequate financing to fund and/or capitalize our acquisitions and start-up activities; high profile qui tam matters and negative publicity regarding Medicaid managed care and Medicare Advantage; changes in funding under our contracts as a result of regulatory or programmatic adjustments and reforms; approval by state regulators of dividends and distributions by our subsidiaries; the imposition of fines by state or federal regulators for perceived operating deficiencies; membership eligibility processes and methodologies; unexpected changes in member utilization patterns, healthcare practices, or healthcare technologies, including an unexpectedly severe or prolonged flu season; high dollar claims related to catastrophic illness; changes in federal or state laws or regulations or in their interpretation; failure to maintain effective and efficient information systems and claims processing technology; the favorable resolution of litigation or arbitration; competition; epidemics such as the avian flu; and other risks and uncertainties as detailed in our reports and filings with the Securities and Exchange Commission and available on its website at www.sec.gov.  All forward-looking statements in this release represent our judgment as of February 13, 2008.  We disclaim any obligation to update any forward-looking statement to conform the statement to actual results or changes in our expectations.

MOLINA HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except for per share data)

(Unaudited)

	Three Months Ended						Year Ended
	December 31,						December 31,
	2007			2006			2007			2006
Revenue:
Premium revenue	$	670,605		$	543,912		$	2,462,369		$	1,985,109
Investment income		9,024			5,608			30,085			19,886
Total revenue		679,629			549,520			2,492,454			2,004,995
Expenses:
Medical care costs		560,839			462,820			2,080,083			1,678,652
General and administrative expenses		80,464			61,032			285,295			229,057
Depreciation and amortization		7,693			6,210			27,967			21,475
Impairment charge on purchased software (1)		–			–			782			–
Total expenses		648,996			530,062			2,394,127			1,929,184
Operating income		30,633			19,458			98,327			75,811
Interest expense		(2,251	)		(717	)		(4,631	)		(2,353	)
Income before income taxes		28,382			18,741			93,696			73,458
Income tax expense		10,471			7,097			35,366			27,731
Net income	$	17,911		$	11,644		$	58,330		$	45,727
Net income per share:
Basic	$	0.63		$	0.41		$	2.06		$	1.64
Diluted	$	0.63		$	0.41		$	2.05		$	1.62
Weighted average number of common shares and
potential dilutive common shares outstanding		28,536,000			28,259,000			28,419,000		$	28,164,000
Operating Statistics:
Medical care ratio (2)		83.6	%		85.1	%		84.5	%		84.6	%
General and administrative expense ratio (3),
excluding premium taxes		8.8	%		7.9	%		8.2	%		8.4	%
Premium taxes included in general and
administrative expenses		3.0	%		3.2	%		3.3	%		3.0	%
Total general and administrative expense ratio		11.8	%		11.1	%		11.5	%		11.4	%
Depreciation and amortization expense ratio (4)		1.1	%		1.1	%		1.1	%		1.1	%
Effective tax rate		36.9	%		37.9	%		37.8	%		37.8	%
(1)Amount represents an impairment charge related to commercial software no longer used for operations.
(2)Medical care ratio represents medical care costs as a percentage of premium revenue.
(3)General and administrative expense ratio represents such expenses as a percentage of total revenue.
(4)Depreciation and amortization expense ratio represents such expenses as a percentage of total revenue.

MOLINA HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except for per share data)

	Dec. 31,				Dec. 31,
	2007				2006
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	459,064			$	403,650
Investments		242,855				81,481
Receivables		111,537				110,835
Income tax receivable		–				7,960
Deferred income taxes		7,087				313
Prepaid expenses and other current assets		12,522				9,263
Total current assets		833,065				613,502
Property and equipment, net		49,555				41,903
Goodwill and intangible assets, net		208,930				143,139
Restricted investments		29,019				20,154
Receivable for ceded life and annuity contracts		29,240				32,923
Other assets		21,675				12,854
Total assets	$	1,171,484			$	864,475
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Medical claims and benefits payable	$	310,089			$	290,048
Deferred revenue		40,104				18,120
Income tax payable		6,523				–
Accounts payable and accrued liabilities		71,417				46,725
Total current liabilities		428,133				354,893
Long-term debt		200,000				45,000
Deferred income taxes		8,515				6,700
Liability for ceded life and annuity contracts		29,240				32,923
Other long-term liabilities		15,118				4,793
Total liabilities		681,006				444,309
Stockholders’ equity:
Common stock, $0.001 par value; 80,000,000 shares authorized;
issued and outstanding: 28,443,680 shares at December 31, 2007,
and 28,119,026 shares at December 31, 2006		28				28
Preferred stock, $0.001 par value; 20,000,000 shares authorized,
no shares issued and outstanding				–
Additional paid-in capital		185,808				173,990
Accumulated other comprehensive gain (loss)		272				(337	)
Retained earnings		324,760				266,875
Treasury stock (1,201,174 shares, at cost)		(20,390	)			(20,390	)
Total stockholders’ equity		490,478				420,166
Total liabilities and stockholders’ equity	$	1,171,484			$	864,475

MOLINA HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

		Year Ended
		December 31,
		2007			2006
Operating activities:
Net income	$	58,330		$	45,727
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		27,967			21,475
Amortization of capitalized credit facility fees		1,042			885
Deferred income taxes		(8,903	)		(399	)
Stock-based compensation		7,18888			5,50505
Changes in operating assets and liabilities:
Receivables		15,007			(38,847	)
Prepaid expenses and other current assets		(2,971	)		1,369
Medical claims and benefits payable		6,682			51,550
Deferred revenue		21,98484			10,44343
Accounts payable and accrued liabilities		17,441			5,188
Income taxes		14,270			(579	)
Net cash provided by operating activities		158,037			102,317
Investing activities:
Purchases of property and equipment		(22,299	)		(20,297	)
Purchases of investments		(264,115	)		(148,795	)
Sales and maturities of investments		103,718			171,225
Net cash (paid) acquired in purchase transactions		(70,172	)		5,820
Increase in restricted investments		(8,365	)		(912	)
Increase in other assets		(4,330	)		(3,334	)
Increase in other long-term liabilities		9,879			239
Net cash (used in) provided by investing activities		(255,684	)		3,946
Financing activities:
Borrowings under credit facility		–			50,000
Proceeds from issuance of convertible senior notes		200,000			–
Repayment of amounts borrowed under credit facility		(45,000	)		(5,000	)
Payment of credit facility fees		(551	)		(459	)
Payment of convertible senior notes fees		(6,498	)		–
Tax benefit from exercise of employee stock options
recorded as additional paid-in capital		853			1,227
Proceeds from exercise of stock options and employee stock plan purchases		4,257			2,416
Net cash provided by financing activities		153,061			48,184
Net increase in cash and cash equivalents		55,414			154,447
Cash and cash equivalents at beginning of period		403,650			249,203
Cash and cash equivalents at end of period	$	459,064		$	403,650

MOLINA HEALTHCARE, INC.

MEMBERSHIP DATA

(Unaudited)

	Dec. 31,		Sept. 30,		Dec. 31,
Total Ending Membership by Health Plan:	2007		2007		2006
California		296,000		288,000		300,000
Michigan		209,000		211,000		228,000
Missouri (1)		68,000		–		–
Nevada (2)		N/A		–		–
New Mexico		73,000		69,000		65,000
Ohio		136,000		138,000		76,000
Texas		29,000		30,000		19,000
Utah		55,000		50,000		52,000
Washington		283,000		284,000		281,000
Subtotal		1,149,000		1,070,000		1,021,000
Indiana (3)		N/A		N/A		56,000
Total		1,149,000		1,070,000		1,077,000
(1)The Company’s Missouri health plan was acquired October 31, 2007.
(2)Less than 1,000 members.
(3)The Company’s Indiana health plan ceased serving members effective January 1, 2007.
Total Ending Membership by State for the Company’s	Dec. 31,		Sept. 30,		Dec. 31,
Medicare Advantage Special Needs Plans:	2007		2007		2006
California		1,115		875		549
Michigan		1,090		814		152
Nevada		520		178		–
Utah		1,860		1,802		1,452
Washington		507		446		235
Total		5,092		4,115		2,388
Total Ending Membership by State for the Company’s	Dec. 31,		Sept. 30,		Dec. 31,
Aged, Blind and Disabled (“ABD”) Population:	2007		2007		2006
California		11,837		10,912		10,717
Michigan		31,399		31,488		33,204
New Mexico		6,792		6,844		6,697
Ohio		14,887		14,965		–
Texas		16,018		16,515		–
Utah		6,795		7,056		6,827
Washington		2,814		2,715		2,713
Total		90,542		90,495		60,158

		Quarter Ended					Year Ended
Total Member Months (1)	Dec. 31,		Sept. 30,		Dec. 31,		Dec. 31,		Dec. 31,
by Health Plan:	2007		2007		2006		2007		2006
California		881,000		859,000		909,000		3,500,000	3,694,000
Michigan		630,000		640,000		688,000		2,597,000	2,365,000
Missouri (2)		136,000		N/A		N/A		136,000	N/A
Nevada		1,000		–		–		1,000	-
New Mexico		214,000		200,000		191,000		803,000	726,000
Ohio		412,000		416,000		213,000		1,567,000	442,000
Texas		88,000		90,000		31,000		335,000	34,000
Utah		155,000		142,000		162,000		593,000	689,000
Washington		849,000		854,000		838,000		3,419,000	3,410,000
Subtotal		3,366,000		3,201,000		3,032,000		12,951,000	11,360,000
Indiana (3)		N/A		N/A		171,000		N/A	499,000
Total		3,366,000		3,201,000		3,203,000		12,951,000	11,859,000
(1) Total member months is defined as the aggregate of each month’s ending membership for the period.
(2) The Company’s Missouri health plan was acquired October 31, 2007.
(3) The Company’s Indiana health plan ceased serving members effective January 1, 2007.

MOLINA HEALTHCARE, INC.

SELECTED FINANCIAL DATA BY HEALTH PLAN

(Dollars in thousands except PMPM amounts)

(Unaudited)

	Three Months Ended December 31, 2007
	Premium Revenue				Medical Care Costs					Medical			Premium Tax
	Total		PMPM		Total			PMPM		Care Ratio			Expense
California	$	98,138	$	111.48	$	81,274		$	92.33		82.8	%	$	2,724
Indiana		11		–		(542	)		–		–			–
Michigan		122,087		193.83		103,067			163.63		84.4	%		6,551
Missouri		30,730		226.65		26,396			194.69		85.9	%		–
Nevada		2,015		1,370.58		1,705			1,160.11		84.6	%		–
New Mexico		77,042		360.74		62,415			292.26		81.0	%		2,650
Ohio		124,385		301.65		112,287			272.31		90.3	%		5,598
Texas		24,047		272.35		13,010			147.35		54.1	%		458
Utah		28,434		183.90		28,360			183.43		99.7	%		–
Washington		163,716		192.78		127,562			150.21		77.9	%		2,727
Other		–		–		5,305			–		-			7
Consolidated	$	670,605	$	199.27	$	560,839		$	166.65		83.6	%	$	20,715
	Three Months Ended December 31, 2006
	Premium Revenue				Medical Care Costs					Medical			Premium Tax
	Total		PMPM		Total			PMPM		Care Ratio			Expense
California	$	92,910	$	102.29	$	82,933		$	91.31		89.3	%	$	2,820
Indiana		28,073		164.60		26,431			154.97		94.2	%		–
Michigan		128,096		186.23		100,746			146.47		78.6	%		7,723
New Mexico		53,509		279.31		45,803			239.09		85.6	%		2,164
Ohio		45,196		212.18		40,050			188.02		88.6	%		2,028
Texas		4,228		135.38		4,307			137.89		101.9	%		55
Utah		38,766		239.46		35,589			219.84		91.8	%		–
Washington		153,017		182.46		121,635			145.04		79.5	%		2,569
Other		117		–		5,326			-		-			2
Consolidated	$	543,912	$	169.81	$	462,820		$	144,50		85.1	%		17,361
	Year Ended December 31, 2007
	Premium Revenue				Medical Care Costs					Medical			Premium Tax
	Total		PMPM		Total			PMPM		Care Ratio			Expense
California	$	378,934	$	108.29	$	310,226		$	88.66		81.9	%	$	11,338
Indiana		366		–		(3,729	)		–		–			–
Michigan		487,032		187.55		409,230			157.59		84.0	%		28,493
Missouri		30,730		226.65		26,396			194.69		85.9	%		–
Nevada		2,438		1,440.73		2,069			1,222.76		84.9	%		–
New Mexico		268,115		333.94		221,567			275.97		82.6	%		9,088
Ohio		436,238		278.39		394,451			251.72		90.4	%		19,631
Texas		88,453		263.90		68,173			203.40		77.1	%		1,598
Utah		116,907		197.19		109,895			185.36		94.0	%		–
Washington		652,970		190.96		519,763			152.00		79.6	%		10,844
Other		186		–		22,042			-		-			28
Consolidated	$	2,462,369	$	190.13	$	2,080,083		$	160.62		84.5	%	$	81,020
	Year Ended December 31, 2006
	Premium Revenue				Medical Care Costs					Medical			Premium Tax
	Total		PMPM		Total			PMPM		Care Ratio			Expense
California	$	372,071	$	100.74	$	328,532		$	88.95		88.3	%	$	11,738
Indiana		82,946		166.29		79,411			159.20		95.7	%		–
Michigan		429,835		181.73		335,696			141.93		78.1	%		25,982
New Mexico		221,597		305.07		187,460			258.08		84.6	%		8,203
Ohio		94,751		214.25		86,249			195.03		91.0	%		4,265
Texas		4,508		133.37		4,688			138.70		104.0	%		79
Utah		165,507		240.10		151,417			219.66		91.5	%		–
Washington		613,750		179.98		484,435			142.06		78.9	%		10,506
Other		144		–		20,764			-		-			4
Consolidated	$	1,985,109	$	167.39	$	1,678,652		$	141.55		84.6	%	$	60,777

MOLINA HEALTHCARE, INC.

DETAIL OF MEDICAL CARE COSTS

(Dollars in thousands, except PMPM amounts)

(Unaudited)

The following table provides detail of the Company’s medical care costs:
	Three Months Ended							Three Months Ended
	December 31, 2007							December 31, 2006
					% of Total							% of Total
					Medical							Medical
	Amount		PMPM		Care Costs			Amount		PMPM		Care Costs
Medical care costs:
Fee-for-service costs	$	359,536	$	106.84		64.0	%	$	310,103	$	96.82		67.0	%
Capitation		98,464		29.26		17.6	%		73,479		22.94		15.9	%
Pharmacy		76,009		22.59		13.6	%		60,508		18.89		13.1	%
Other		26,830		7.97		4.8	%		18,730		5.85		4.0	%
Total medical
care costs	$	560,839	$	166.66		100.0	%	$	462,820	$	144.50		100.0	%
	Year Ended								Year Ended
	December 31, 2007								December 31, 2006
					% of Total							% of Total
					Medical							Medical
	Amount		PMPM		Care Costs			Amount		PMPM		Care Costs
Medical care costs:
Fee-for-service costs	$	1,343,911	$	103.77		64.6	%	$	1,125,031	$	94.86		67.0	%
Capitation		375,206		28.97		18.0	%		261,476		22.05		15.6	%
Pharmacy		270,363		20.88		13.0	%		209,366		17.65		12.5	%
Other		90,603		7.00		4.4	%		82,779		6.98		4.9	%
Total medical
care costs	$	2,080,083	$	160.62		100.0	%	$	1,678,652	$	141.54		100.0	%

MOLINA HEALTHCARE, INC.

CHANGE IN MEDICAL CLAIMS AND BENEFITS PAYABLE

(Dollars in thousands)

(Unaudited)

The following table shows the components of the change in medical claims and benefits payable for the year ended December 31, 2007 and 2006:

	Year Ended
	December 31,
	2007			2006
Balances at beginning of period	$	290,048		$	217,354
Medical claims and benefits payable from business acquired during the period		13,359			21,144
Components of medical care costs related to:
Current year		2,136,381			1,716,256
Prior years		(56,298	)		(37,604	)
Total medical care costs		2,080,083			1,678,652
Payments for medical care costs related to:
Current year		1,851,035			1,443,843
Prior years		222,366			183,259
Total paid		2,073,401			1,627,102
Balances at end of period	$	310,089		$	290,048
Benefit from prior period as a percentage of premium revenue		2.3	%		1.9	%
Benefit from prior period as a percentage of balance at beginning of period		19.4	%		17.3	%
Benefit from prior period as a percentage of total medical care costs		2.7	%		2.2	%
The Company’s claims liability includes an allowance for adverse claims development based on historical experience and other factors including, but not limited to, variation in claims payment patterns, changes in utilization and cost trends, known outbreaks of disease, and large claims.  The Company’s reserving methodology is consistently applied across all periods presented.  Accordingly, any benefit recognized in medical care costs resulting from favorable development of an estimated liability at the start of the period (captured as a component of “medical care costs related to prior years”) may be offset by the addition of an allowance for adverse claims development when estimating the liability at the end of the period (captured as a component of “medical care costs related to current year”).
	Year Ended
	December 31,
	2007			2006
Days in claims payable		52			57
Number of members at end of period		1,149,000			1,077,000
Number of claims in inventory at end of period (1)		161,395			260,958
Billed charges of claims in inventory at end of period (in thousands) (1)	$	211,958		$	285,385
Claims in inventory per member at end of period (1)		0.14			.26
(1) 2006 claims data excludes information for Cape Health Plan membership of approximately 83,000 members.  Cape membership was processed on a separate claims platform through December 31, 2006.