Most state Medicaid programs don’t cover the new class of weight loss drugs for obesity, but that could soon change. Half of those that don’t are considering adding coverage, per a new KFF report.
While all state Medicaid programs cover GLP-1 agonists for type 2 diabetes, it’s much less common for them to cover the drugs for obesity. Currently, just 13 state Medicaid programs cover GLP-1s for obesity. Most of the states that don’t cite the drugs’ high cost.
Now, “state interest in covering obesity drugs is growing,” said Liz Williams, a senior policy analyst in KFF’s Program on Medicaid and the Uninsured. KFF’s 24th annual survey of state Medicaid directors drew responses from 49 state Medicaid programs plus Washington, D.C.
The potential for expanded coverage under Medicaid comes as private plans are starting to aggressively crack down on covering the medications for obesity. Medicare prohibits coverage of the drugs for that indication.
KFF’s report notes an increase in spending on GLP-1 drugs in Medicaid programs starting in 2021. The report said net Medicaid spending on prescription drugs grew 72% between fiscal year 2017 and fiscal year 2023, and prescription drugs accounted for about 6% of total Medicaid spending in that time. KFF said much of the spending growth in recent years is because of new, high-cost specialty drugs, including GLP-1s and emerging cell and gene therapies.
Among the 13 states that currently cover GLP-1s for obesity, KFF’s report says 11 cover all three of the drugs currently approved for that indication: Saxenda, Wegovy, and Zepbound. (KFF’s report says 12 states and not 13 because it was released before North Carolina began covering the drugs for obesity.)
The report notes that South Carolina plans to add coverage for obesity at the end of 2024, and Connecticut has a legislative mandate to add coverage but it has not yet been implemented. Four additional states have coverage in place but only for older drugs that are not GLP-1s.
The main factor state Medicaid officials must weigh is the high cost of covering the drugs, whose list price is at least $900 per month. Some states require legislative approval to add coverage, and they would also need to develop clinical criteria.
On the flip side of the costs, Williams said officials are considering the potential for cost savings years down the road, if members who use the medications avoid developing other health conditions as a result. Four in 10 states said the potential for positive health outcomes was a factor in their coverage decisions, according to the report.
Many of the states that do cover GLP-1s for obesity under Medicaid have body mass index requirements and other criteria patients must meet before the drugs are covered, according to a report by the actuarial firm Milliman. In Mississippi, for example, patients must qualify based on their BMI and they’re evaluated on their progress toward weight loss goals.
For its report, KFF received responses from officials in 50 states during the summer of 2024. Their responses concern fiscal years 2024 and 2025, which covers a period of uncertainty for the programs. Medicaid programs were prohibited from disenrolling members during the Covid-19 pandemic in exchange for more money from the federal government. Beginning last year and ending earlier this year, states had to comb through their membership and determine who was still eligible for Medicaid.
While the redetermination process is over, states are still waiting to learn more about the health status and costs of the members that remain on the programs. The assumption has widely been that the people who remain on the program are sicker and require more care, and health insurers are reporting that to be the case. KFF’s report says two-thirds of the states whose programs use private insurers said they sought federal approval to amend their rates to account for higher-cost members.
Despite stable budgets currently, over half of the states that responded to KFF’s survey said there is a 50-50 or greater chance of a Medicaid budget shortfall in the coming year. That’s a significant change from last year’s survey, when most states did not anticipate revenue shortfalls. They cited declining Medicaid enrollment coupled with higher costs per enrollee, plus the long-term potential for emerging high-cost prescription drugs, the high cost of medical care, and workforce challenges.
The fact that states have already spent most of their federal pandemic assistance is another reason Medicaid directors say they may face budget shortfalls, according to Kate McEvoy, executive director of the National Association of Medicaid Directors, which collaborated on the KFF report. The Congressional Budget Office projects states will receive $58 billion less from the federal government in fiscal year 2024 than they did in the prior fiscal year. Because of that, Medicaid officials told KFF they expect state Medicaid spending to increase by 7% in fiscal year 2025, even as enrollment nationally falls by about 4%.
Not only that, McEvoy said Medicaid programs are drawing less tax revenue and policymakers are likely to apply more scrutiny on investments in Medicaid.
“I think that will definitely have an impact on whether programs can expand their service array, cover people at higher income tiers, or pursue innovation projects,” McEvoy said.