Medicaid coverage of weight-loss drugs could cost state up to $70 million a year

Indiana’s Medicaid program estimates the Biden administration’s proposal to expand coverage of weight-loss treatment for people with obesity could cost it up to $70 million a year, covering up to 20% of eligible enrollees.

The planned new rule, announced by the White House in November, would greatly expand Medicare Part D and Medicaid coverage for popular medications such as Eli Lilly and Co.’s Zepbound and Novo Nordisk’s Ozempic and Wegovy to treat obesity alone. Current Centers for Medicare and Medicaid Services, or CMS, rules cover such drugs for diabetes or other weight-related conditions.

The proposed new rule will be handed off from the Biden administration to the incoming Trump Administration, creating uncertainty about its approval and implementation path. In announcing the proposal, CMS cited “the prevailing medical consensus toward recognizing obesity as a disease” and the prevalence of obesity in the United States in expanding coverage of weight-loss drugs.

Research has found weight-loss drugs under the GLP-1 classification can be effective at helping people lose weight and avoid or control weight-related conditions such as diabetes or sleep apnea.

In its forecast presented in December, the Indiana Family and Social Service Administration’s Office of Medicaid Policy and Planning estimated that 5% to 20% of eligible members would be prescribed weight-loss medications, costing $11 million to $70 million a year. The state’s Medicaid program primarily pays for health care for low-income people and those with disabilities—the state and federal government share Medicaid’s costs.

Indiana FSSA spokesperson Michele Holtkamp said that range was a preliminary estimate of the state’s cost.

“Total costs may be in the roughly $50 million to $314 million range, preliminary estimates show,” she said in an email.

Holtkamp added that the estimates were calculated using state data on the number of Medicaid members including children with an obesity diagnosis who do not already qualify for the drugs because of another condition like diabetes.

The demand for weight-loss drugs is immense. In Indiana, almost 38% of Hoosiers have a body mass index that would classify them as obese, according to the Centers for Disease Control and Prevention. But weight-loss drugs are costly, with many Americans paying out of pocket.

The White House said Medicare coverage would reduce out-of-pocket costs for weight-loss prescription drugs by as much as 95% for some enrollees.

A report from the Penn Wharton Budget Model economic analysis and public policy research group estimates that if the proposed rule becomes a reality in 2026, 14 million Medicare and 33 million Medicaid beneficiaries would be newly eligible for coverage of weight drugs. The group said it expected an initial take-up rate of 3%, climbing to 31% in 2034.

According to the Penn Wharton Budget Model, estimated prices of the drugs would drop with Medicare’s ability to negotiate prices, new medications and patent expirations.

“We project that the average annual cost per user decreases from $5,300 to $860 for Medicare,” the report stated. “The average cost per user for Medicaid would be 75% of that amount, with the remaining 25% paid by the states.”

While weight-loss drugs increase health costs in the short term, some studies indicate that they will lead to lower costs in the long term.