<PAGE>
                                                                  Exhibit 10.7.8

                                STATE OF ILLINOIS
                            DEPARTMENT OF PUBLIC AID

                             AMENDMENT NO. 2 TO THE
                     CONTRACT FOR FURNISHING HEALTH SERVICES
                                      BY A
                           MANAGED CARE ORGANIZATION
                                 2004-24-001-KA2

WHEREAS, the parties to the Contract for Furnishing Health Services by a Managed
Care Organization ("CONTRACT"), the ILLINOIS DEPARTMENT OF HEALTHCARE & FAMILY
SERVICES (FORMERLY PUBLIC AID), 201 South Grand Avenue East, Springfield,
Illinois 62763-0001 (herein referred to as "Department"), acting by and through
its Director, and AMERIGROUP ILLINOIS, INC., 211 West Wacker Drive, Suite 1350,
Chicago, IL 60606 (hereinafter referred to as "Contractor"), desire to amend the
CONTRACT; and

WHEREAS, the Department is statutorily obligated to amend this Contract to
achieve net liability savings in its managed care appropriation, and;

WHEREAS, the Department's actuary has certified that the Contract and rates
resulting from this amendment are actuarially sound;

NOW THEREFORE, the parties agree to amend the contract as follows:

1.   Article V, Section 5.1 of the contract is amended to read as follows
     effective for dates of service August 1, 2005, and later:

     5.1  SERVICES.

          (a) Amount, Duration and Scope of Coverage. The Contractor shall
comply with the terms of 42 C.F.R. Section 438.206(b) and provide or arrange to
have provided to all Enrollees all services described in 89 I11. Adm. Code, Part
140 as amended from time to time and not specifically excluded therein or in
this Article V, Section 5.1 in accordance with the terms of this Contract.
Covered Services shall be provided in the amount, duration and scope as set
forth in 89 I11. Adm. Code, Part 140 and this Contract, and shall be sufficient
to achieve the purposes for which such Covered Services are furnished. This duty
shall commence at the time of initial coverage as to each Enrollee. The
Contractor shall, at all times, cover the appropriate level of service (i.e.,
triage, urgent) for all Emergency Services provided in an emergency room
setting. The Contractor shall notify the Department in writing within five (5)
days following a change in the Contractor's network of Affiliated Providers that
renders the Contractor unable to provide one (1) or more Covered Service(s) in
any Contracting Area. The Contractor shall not refer Enrollees to publicly
supported health care entities to receive Covered Services, for which the
Contractor receives payment from the Department, unless such entities are
Affiliated with the Contractor's Plan. Such publicly supported health care
entities include, but are not limited to, Chicago Department of Public Health
and its clinics, Cook County Bureau of Health Services, and local health
departments. The Contractor shall provide a mechanism for an Enrollee to


                                     Page 1
<PAGE>
obtain a second opinion from a qualified Provider, whether Affiliated or
non-Affiliated, at no cost to the Enrollee.

          (b) Enumerated Covered Services. The Contractor shall have a
sufficient number of Affiliated Providers (including Tertiary Care hospital(s)
and, where appropriate, advanced practice nurses) in place to provide all of the
following services and benefits (which shall be specifically included as Covered
Services under this Contract) to Enrollees at all times during the term of this
Contract, whenever Medically Necessary, except to the extent services are
identified as excluded services pursuant to subsection (e) of this Section 5.1:

          -    Assistive/augmentative communication devices;

          -    Audiology services, physical therapy, occupational therapy and
               speech therapy;

          -    Behavioral health services, including subacute alcohol and
               substance abuse services and mental health services, in
               accordance with subsection (c) hereof;

          -    Blood, blood components and the administration thereof;

          -    Certified hospice services;

          -    Chiropractic services;

          -    Clinic services (as described in 89 I11. Adm. Code, Part
               140.460);

          -    Diagnosis and treatment of medical conditions of the eye;*

          -    Durable and nondurable medical equipment and supplies;

          -    Emergency Services;

          -    Family planning services;

          -    Home health care services;

          -    Inpatient hospital services (including dental hospitalization in
               case of trauma or when related to a medical condition and acute
               medical detoxification);

          -    Inpatient psychiatric care;

          -    Laboratory and x-ray services; The drawing of blood for lead
               screening shall take place within the Contractor's Affiliated
               facilities or elsewhere at the Contractor's expense.**

----------
*    Covered Services may be provided by an optometrist operating within the
     scope of his license.


                                     Page 2
<PAGE>
          -    Medical procedures performed by a dentist;

          -    Nurse midwives services;

          -    Nursing facility services for the first ninety (90) days;***

          -    Orthotic/prosthetic devices, including prosthetic devices or
               reconstructive surgery incident to a mastectomy;

          -    Outpatient hospital services (excluding outpatient behavioral
               health services);

          -    Physicians' services, including psychiatric care;

          -    Podiatric services;

          -    Routine care in conjunction with certain investigational cancer
               treatments, as provided in Public Act 91-0406;

          -    Services required to treat a condition diagnosed as a result of
               EPSDT services, in accordance with 89 I11. Adm. Code 140.485;

          -    Services to Prevent Illness and Promote Health in accordance with
               subsection (d) hereof;

          -    Transplants covered under 89 I11. Adm. Code 148.82 (using
               transplant providers certified by the Department, if the
               procedure is performed in the State); and

          -    Transportation to secure Covered Services,

          (c)  Behavioral Health Services.

               (1) The Contractor will provide the following behavioral health
     services, which are Covered Services:

          -    Inpatient psychiatric or substance abuse services that are
               provided in general hospital medical units;

----------
**   All laboratory tests for children being screened for lead must be sent for
     analysis to the Illinois Department of Public Health's laboratory.

***  Contractors will be responsible for covering up to a maximum of ninety (90)
     days nursing facility care (or equivalent care provided at home because a
     skilled nursing facility is not available) annually per Enrollee. Periods
     in excess of ninety (90) days annually will be paid by the Department
     according to its prevailing reimbursement system.


                                     Page 3
<PAGE>
          -    Inpatient psychiatric services provided in a hospital that is a
               psychiatric hospital or a distinct psychiatric unit, as defined
               in 89 Ill. Adm. Code 148.40(a)(1);

          -    Inpatient ACUTE alcoholism and substance abuse treatment
               (detoxification);

          -    Hospital-based organized clinic services referred to as
               outpatient treatment psychiatric services for Type A and Type B
               Psychiatric Clinic Services, as defined in 89 Ill. Adm. Code
               148.140(b)(1)(E);

          -    Behavioral health services provided by Physicians, including
               psychiatrists; and

          -    Laboratory services provided on an outpatient basis for
               behavioral health, even if ordered by a behavioral health
               provider in connection with the provision of treatment that is
               excluded from Covered Services.

               (2) If an Enrollee presents himself to the Contractor for
     behavioral health services, or is referred through a third party, the
     Contractor will complete a behavioral health assessment.

          -    If the assessment indicates that all services needed are within
               the scope of Covered Services, the Contractor will arrange for
               the provision of all such Covered Services.

          -    If the assessment indicates that outpatient services are needed
               beyond the scope of Covered Services, the Contractor will explain
               to the Enrollee the services needed and the importance of
               obtaining them and provide the Enrollee with a list of Community
               Behavioral Health Providers (CBHP). The Contractor will assist
               the Enrollee in contacting a CBHP chosen by the Enrollee, unless
               the Enrollee objects.

          -    If a Enrollee obtains needed comprehensive services through a
               CBHP, the Contractor will be responsible for payment for
               laboratory services in connection with the comprehensive services
               provided by the CBHP. The Contractor shall not be liable for
               other Covered Services provided by the CBHP. The Contractor may
               require that laboratory services are provided by Providers that
               are Affiliated with Contractor.

          (d) Services to Prevent Illness and Promote Health. The Contractor
shall make documented efforts to provide initial health screenings and
preventive care to all Enrollees. The Contractor shall provide, or arrange to
provide, the following Covered Services to all Enrollees, as appropriate, to
prevent illness and promote health:

               (1) EPSDT services in accordance with 89 Ill. Adm. Code 140.485
     and described in this Article V, Section 5.12(a);


                                     Page 4
<PAGE>
               (2) Preventive Medicine Schedule which shall address preventive
     health care issues for Enrollees twenty-one (21) years of age or older
     (Article V, Section 5.12(b));

               (3) Maternity care for pregnant Enrollees (Article V, Section
     5.12(c)); and

               (4) Family planning services and supplies, including physical
     examination and counseling provided during the visit, annual physical
     examination for family planning purposes, pregnancy testing, voluntary
     sterilization, insertion or injection of contraceptive drugs or devices,
     and related laboratory and diagnostic testing (except to the extent an
     Enrollee has chosen to obtain such services and supplies from a non-
     Affiliated Provider, in which case the Department shall be responsible for
     providing payment for such services).

          (e) Exclusions from Covered Services. In addition to those services
and benefits excluded from Covered Services by 89 Ill. Adm. Code, Part 140, as
amended from time to time, the following services and benefits shall NOT be
included as Covered Services:

               (1) Dental services;

               (2) Mental health clinic services as provided through a community
     behavioral health provider as identified in 89 Ill. Adm. Code 140.452 and
     140.454 and further defined in 59 Ill. Adm. Code, Part 132 "Medicaid
     Community Mental Health Services Program.";

               (3) Subacute alcoholism and substance abuse treatment services as
     provided through a community behavioral health provider as identified in 89
     Ill. Adm. Code 148.340(a) and further defined in 77 Ill. Adm. Code 2090;

               (4) Routine examinations to determine visual acuity and the
     refractive state of the eye, eyeglasses, other devices to correct vision,
     and any associated supplies and equipment. The Contractor shall refer
     Enrollees needing such services to Providers participating in the Medical
     Assistance Program able to provide such services, or to a central referral
     entity that maintains a list of such Providers;

               (5) Nursing facility services, or equivalent care provided at
     home because a skilled nursing facility is unavailable, beginning on the
     ninety-first (91st) day of service in a calendar year;

               (6) Services provided in an Intermediate Care Facility for the
     Mentally Retarded/Developmentally Disabled and services provided in a
     nursing facility to mentally retarded or developmentally disabled
     Participants;

               (7) Early intervention services, including case management,
     provided pursuant to the Early Intervention Services System Act (325 ILCS
     20 et seq.);

               (8) Services provided through school-based clinics as such
     clinics are defined by the Department;


                                     Page 5
<PAGE>
               (9) Services provided through local education agencies that are
     enrolled with the Department under an approved individual education plan
     (IEP);

               (10) Services provided under Section 1915(c) home and community-
     based waivers;

               (11) Services funded through the Juvenile Rehabilitation Services
     Medicaid Matching Fund;

               (12) Services that are experimental and/or investigational in
     nature;

               (13) Services provided by a non-Affiliated Provider and not
     authorized by the Contractor, unless this Contract specifically requires
     that such services be covered;

               (14) Services that are provided without first obtaining a
     required referral or prior authorization as set forth in the Enrollee
     handbook;

               (15) Medical and/or surgical services provided solely for
     cosmetic purposes;

               (16) Diagnostic and/or therapeutic procedures related to
     infertility/sterility; and

               (17) Pharmacy services.

          (f) Limitations on Covered Services. The following services and
benefits shall be limited as Covered Services:

               (1) Termination of pregnancy shall be provided only as allowed by
     applicable State and federal law (42 C.F.R. Part 441, Subpart E). In any
     such case, the requirements of such laws must be fully complied with and
     DPA Form 2390 must be completed and filed in the Enrollee's medical record.
     Termination of pregnancy shall not be provided to KidCare Enrollees.

               (2) Sterilization services may be provided only as allowed by
     State and federal law (see 42 C.F.R. Part 441, Subpart F). In any such
     case, the requirements of such laws must be fully complied with and a DPA
     Form 2189 must be completed and filed in the Enrollee's medical record.

               (3) If a hysterectomy is provided, a DPA Form 1977 must be
     completed and filed in the Enrollee's medical record.

          (g) Right of Conscience. The parties acknowledge that pursuant to 745
ILCS 70/1 et seq., a Contractor may choose to exercise a right of conscience by
not rendering certain Covered Services. Should the Contractor choose to exercise
this right, the Contractor must promptly notify the Department of its intent to
exercise its right of conscience in writing. Such notification shall contain the
services that the Contractor is unable to render pursuant to the exercise of the
right of conscience. The parties agree that at that time the Department shall
adjust the Capitation payment to the Contractor and amend the contract
accordingly.


                                     Page 6
<PAGE>
          Should the Contractor choose to exercise this right, the Contractor
must notify Potential Enrollees, Prospective Enrollees and Enrollees that it has
chosen to not render certain Covered Services, as follows:

               (1) To Potential Enrollees, prior to Enrollment;

               (2) To Prospective Enrollees, during Enrollment; and

               (3) To Enrollees, within ninety (90) days after adopting a policy
     with respect to any particular service that previously was a Covered
     Service.

          (h)  Emergency Services.

               (1) The Contractor shall cover Emergency Services for all
     Enrollees whether the Emergency Services are provided by an Affiliated or
     non-Affiliated Provider.

               (2) The Contractor shall not impose any requirements for prior
     approval of Emergency Services. If an Enrollee calls the Contractor to
     request Emergency Services, such call shall receive an immediate response.

               (3) The Contractor shall cover Emergency Services for Enrollees
     who are temporarily away from their residence and outside the Contracting
     Area for all Emergency Services to which they would be entitled within the
     Contracting Area.

               (4) The Contractor shall have no obligation to cover medical
     services provided on an emergency basis that are not Covered Services under
     this Contract.

               (5) Elective care or care required as a result of circumstances
     that could reasonably have been foreseen prior to the Enrollee's departure
     from the Contracting Area are not covered. Unexpected hospitalization due
     to complications of pregnancy shall be covered. Routine delivery at term
     outside the Contracting Area, however, shall not be covered if the Enrollee
     is outside the Contracting Area against medical advice unless the Enrollee
     is outside of the Contracting Area due to circumstances beyond her control.
     The Contractor must educate the Enrollee of the medical and financial
     implications of leaving the Contracting Area and the importance of staying
     near the treating Provider throughout the last month of pregnancy.

               (6) The Contractor shall provide ongoing education to Enrollees
     regarding the appropriate use of Emergency Services.

               (7) The Contractor shall not condition coverage for Emergency
     Services on the treating Provider notifying the Contractor of the
     Enrollee's screening and treatment within ten (10) calendar days of
     presentation for Emergency Services.

               (8) The determination of whether or not an Enrollee is
     sufficiently Stabilized for discharge or transfer to another facility shall
     be binding on the Contractor.

          (i) Post-Stabilization Services. The Contractor shall cover
Post-Stabilization Services provided by an Affiliated or non-Affiliated Provider
in any the following situations: (a)


                                     Page 7
<PAGE>
the Contractor authorized such services; (b) such services were administered to
maintain the Enrollee's stabilized condition within one (1) hour of a request to
the Contractor for authorization of further Post-Stabilization Services; or (c)
the Contractor does not respond to a request to authorize further
Post-Stabilization Services within one (1) hour, the Contractor could not be
contacted, or the Contractor and the treating Provider cannot reach an agreement
concerning the Enrollee's care and an Affiliated Provider is unavailable for a
consultation, in which case the treating Provider must be permitted to continue
the care of the Enrollee until an Affiliated Provider is reached and either
concurs with the treating Provider's plan of care or assumes responsibility for
the Enrollee's care.

          (j) Additional Services or Benefits. The Contractor shall obtain prior
approval from the Department before offering any additional service or benefit
not required under this Contract to all Enrollees. The Contractor shall notify
Enrollees before discontinuing an additional service or benefit. The notice to
Enrollees must be approved in advance by the Department. The Contractor shall
continue any ongoing course of treatment for an Enrollee then receiving such
service or benefit.

          (k) Telephone Access. The Contractor shall establish a toll-free
twenty-four (24) hour telephone number to confirm eligibility for benefits and
seek prior approval for treatment where required under the Plan, and shall
assure twenty-four (24) hour access, via telephone(s), to medical professionals,
either to the Plan directly or to the Primary Care Providers, for consultation
to obtain medical care. The Contractor must also make a toll-free number
available, at a minimum during the business hours of 9:00 a.m. until 5:00 p.m.
on regular business days. This number also will be used to confirm eligibility
for benefits, for approval for non-emergency services and for Enrollees to call
to request Site, Primary Care Provider, or Women's Health Care Provider changes,
to make complaints or grievances, to request disenrollment and to ask questions.
The Contractor may use one toll-free number for these purposes or may establish
two separate numbers.

2.   Any references in the contract to pharmacy services inconsistent with the
     changes in Article V, Section 5.1 for dates of service August 1, 2005 or
     later shall be read in a manner consistent with the changes in Article V,
     Section 5.1.

3.   The following provision is added to the contract at Article VII, Section
     7.12:

     7.12 MEDICAL LOSS RATIO GUARANTEE

          (a) For each calendar quarter that this contract is in effect,
effective with the quarter beginning April 1, 2005, if the Contractor's Medical
Loss Ratio (MLR) is less than 82%, the Department will recover by deduction from
future payments a percentage of the quarter's premium revenue equal to the
difference between the reported MLR and 82%.

          (b) Medical Loss Ratio shall be calculated by dividing total hospital
and medical expenses incurred in Illinois by premium revenue paid by the
Department. Premium revenue for a quarter shall be the premium revenue accrued,
including Hospital Delivery Case Rate Payments. Expenses reported as Incurred
But Not Reported (IBNR) shall be subject to review by the Department for
actuarial soundness. All elements of reports used to calculate MLR are subject
to audit by the Department. Audits may be ordered by the Department within


                                     Page 8
<PAGE>
30 days of Departmental receipt of each quarterly report, and audits shall
encompass the total subject matter of that report.

          (c) Hospital and medical expenses are the incurred costs of providing
direct care to Enrollees for Covered Services. Outreach and general education
are not included in medical expenses.

          (d) At the end of the four quarters ending March 31, 2006, the
Department will review the Contractor's MLR for the full four quarters and
recover or reconcile previous recoveries so that the Department has recovered
the percentage of the total premium revenue for the four quarters equal to the
difference between the cumulative MLR below 82% and 82%. Reconciliation shall
consist of payment by the Contractor of any difference below the annualized 82%
MLR not previously deducted, or repayment to the Contractor of deductions over
the annualized 82% MLR previously made by the Department. A similar
reconciliation will be performed at the end of each four quarters or the
termination of any contractual relationship between the parties. Notwithstanding
the provisions of section 7.12(b), the Department may order an audit of the
reporting for the full four quarters within 45 days of Departmental receipt of a
cumulative report of the four quarters.

          (e) The Contractor shall report all information necessary to
effectuate this section in a format and on a schedule consistent with NAIC
guidelines. The Department may request additional supporting information
necessary to effectuate this section, and the Contractor shall report this
information to the Department in a timely manner.

          (f) For purposes of calculating the Contractor's MLR, for the quarter
beginning April 1, 2005, and for the month of July 2005, premium revenue will be
adjusted to remove premium revenue for pharmacy services in excess of
Contractor's costs for pharmacy services.

4.   Attachment I shall be deleted and replaced by the attached First Amended
     Attachment I. Each reference to Attachment I in the Contract shall be
     replaced with a reference to First Amended Attachment I.

All other terms and conditions of the CONTRACT shall remain in full force and
effect.


                                     Page 9
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto caused this agreement to amend the
CONTRACT to be executed by their duly authorized representatives, effective
August 1, 2005.

DEPARTMENT OF HEALTHCARE &              AMERIGROUP ILLINOIS, INC.
FAMILY SERVICES


By:                                     By:
    ---------------------------------       ------------------------------------
    Barry S. Maram
                                        Printed Name:
                                                      --------------------------
Title: Director                         Title:
                                               ---------------------------------
Date:                                   Date:
      -------------------------------         ----------------------------------
                                        Fein:
                                              ----------------------------------


                                     Page 10
<PAGE>
                           FIRST AMENDED ATTACHMENT I

                                  RATE SHEETS

(a)  Contractor Name: AMERIGROUP Illinois, Inc.

     Address:         211 West Wacker Drive, Suite 1350
                      Chicago, IL 60606

(b)  Contracting Area(s) Covered by the Contractor and Enrollment Limit:

<TABLE>
<CAPTION>
Contracting Area   Enrollment Limit
----------------   ----------------
<S>                <C>
    Region IV           100,000
</TABLE>

(c)  Total Enrollment Limit for all Contracting Areas: 100,000

(d)  Threshold Review Levels: 80,000

(e)  Standard Capitation Rates for Enrollees, effective AUGUST 1, 2003 through
     JULY 31, 2005:

<TABLE>
<CAPTION>
                         Region I    Region II   Region III   Region IV    Region V
      Age/Gender           (N.W.     (Central     (Southern     (Cook      (Collar
      Mo = month         Illinois)   Illinois)    Illinois)    County)    Counties)
      Yr = year             PMPM       PMPM         PMPM         PMPM        PMPM
----------------------   ---------   ---------   ----------   ---------   ---------
<S>                      <C>         <C>          <C>         <C>         <C>
0-3Mo                    $1,152.25   $1,178.77    $1,242.71   $1,244.64    $854.58
4Mo-1Yr                     127.81      117.63       165.94      125.04     108.35
2Yr-5Yr                      63.77       67.81        71.74       58.67      56.28
6Yr-13Yr                     72.08       79.78        75.18       58.18      57.47
14Yr-20Yr, Male             115.93      135.96       131.18       90.67     142.60
14Yr-20Y, Female            148.51      157.40       155.15      112.48     119.82
21Yr-44Yr, Male             161.79      216.53       201.90      164.23     159.43
21Yr-44Yr, Female           217.61      228.14       237.13      185.81     184.20
45Yr+ Male and Female       437.86      486.40       476.29      359.61     409.17
</TABLE>


                                   Att. I - 1
<PAGE>
     Standard Capitation Rates for Enrollees, effective AUGUST 1, 2005 through
JULY 31, 2006:

<TABLE>
<CAPTION>
                         Region I    Region II   Region III   Region IV    Region V
      Age/Gender           (N.W.      (Central    (Southern     (Cook      (Collar
      Mo = month         Illinois)   Illinois)    Illinois)    County)    Counties)
      Yr = year             PMPM        PMPM        PMPM         PMPM        PMPM
----------------------   ---------   ---------   ----------   ---------   ---------
<S>                      <C>         <C>         <C>          <C>         <C>
0-3Mo                    $1,342.61   $1,178.83    $1,271.32   $1,369.28    $948.46
4Mo-1Yr                     121.62      109.83       154.41      117.41      99.27
2Yr-5Yr                      53.51       57.02        59.41       51.49      49.60
6Yr-13Yr                     49.37       51.29        52.22       45.53      42.00
14Yr-20Yr, Male              85.90       92.02        85.37       70.16     100.73
14Yr-20Y, Female            127.53      128.58       123.97       94.84      98.76
21Yr-44Yr, Male             113.28      161.06       139.13      121.91     110.33
21Yr-44Yr, Female           164.91      167.03       168.42      148.97     141.81
45 Yr+ Male and Female      277.48      310.00       275.75      258.08     273.13
</TABLE>

(f)  Hospital Delivery Case Rate, effective AUGUST 1, 2003 through JULY 31,
     2005:

<TABLE>
<S>                      <C>         <C>         <C>         <C>         <C>
Hospital Delivery Case
           Rate
      (per delivery)     $3,196.12   $3,104.66   $3,281.22   $3,748.33   $3,276.03
</TABLE>

     Hospital Delivery Case Rate, effective AUGUST 1, 2005 through JULY 31,
2006:

<TABLE>
<S>                      <C>         <C>         <C>         <C>         <C>
Hospital Delivery Case
           Rate
      (per delivery)     $3,008.88   $2,900.77   $3,100.59   $3,431.08   $3,113.07
</TABLE>


                                   Att. I - 2