Additional state Medicaid programs may soon cover Wegovy and Zepbound

Most state Medicaid programs don’t cover the new class of weight-loss anti-obesity drugs, but that could soon change. Half of those who don’t are considering additional coverage, according to a new KFF report.

While all state Medicaid programs cover GLP-1 agonists for type 2 diabetes, they are far less likely to cover obesity medications. Currently, only 13 state Medicaid programs cover GLP-1 for obesity. Most states do not mention the high cost of the drugs.

Now, “state interest in obesity drug coverage is growing,” said Liz Williams, senior policy analyst in the KFF Medicaid and Uninsured Program. The 24th annual KFF survey of state Medicaid directors drew responses from 49 state Medicaid programs as well as Washington, DC

The potential for expanded coverage under Medicaid comes as private health insurers begin to aggressively oppose coverage of obesity medications. Medicare prohibits coverage of the medication for this indication.

KFF’s report finds an increase in spending on GLP-1 drugs in Medicaid programs starting in 2021. According to the report, net Medicaid spending on prescription drugs increased 72% between fiscal year 2017 and fiscal year 2023, with prescription drugs accounting for about 6% of total Medicaid spending during that time. According to KFF, much of the spending growth in recent years has come from new, high-cost specialty drugs, including GLP-1 and emerging cell and gene therapies.

Of the 13 states that currently cover GLP-1 for obesity, 11 cover all three drugs currently approved for this indication: Saxenda, Wegovy and Zepbound, according to the KFF report. (The KFF report says it covers 12 states, not 13, because it was published before North Carolina began covering obesity medications.)

The report notes that South Carolina plans to introduce additional obesity coverage in late 2024 and that Connecticut has a legislative mandate to expand coverage but has not yet implemented it. Insurance coverage exists in four other states, but only for older medications that are not GLP-1 medications.

The main factor state Medicaid officials must weigh is the high cost of the drugs, whose list price is at least $900 a month. Some states would require legislative approval to expand coverage and would also need to develop clinical criteria.

On the other side of costs, Williams said officials are considering the potential for cost savings over the next few years if members taking the medications don’t develop other health problems as a result. Four out of 10 states said the potential for positive health outcomes was a factor in their insurance decisions, according to the report.

Many of the states that cover GLP-1 for obesity under Medicaid have body mass index requirements and other criteria that patients must meet before the drugs are covered, according to a report from actuarial firm Milliman. In Mississippi, for example, patients must qualify based on their BMI and are assessed based on their progress toward their weight loss goals.

The KFF received responses from officials in 50 states for its report in the summer of 2024. Their answers cover fiscal years 2024 and 2025, which cover a period of uncertainty for the programs. During the Covid-19 pandemic, Medicaid programs were prohibited from disenrolling members if they received more money from the federal government to do so. From last year to early this year, states had to comb through their membership bases and determine who was still eligible for Medicaid.

While the redesignation process is complete, states are still waiting to learn more about the health status and costs of members who continue to participate in the programs. It has been widely assumed that people who remain in the program will be sicker and require more care, and health insurers report that this is the case. According to the KFF report, two-thirds of states whose programs use private insurers said they had sought federal approval to change their rates to accommodate higher-cost members.

Despite currently stable budgets, more than half of the states that responded to the KFF survey reported a 50-50 or higher chance of a Medicaid budget shortfall next year. That’s a significant change from last year’s survey, when most states did not expect revenue shortfalls. They cited declines in Medicaid enrollment coupled with higher costs per enrollee, as well as the long-term potential for new expensive prescription drugs, the high cost of medical care and employment challenges.

According to Kate McEvoy, executive director of the National Association of Medicaid Directors, who worked on the KFF report, the fact that states have already spent most of their federal pandemic aid is another reason why Medicaid directors say they are following along could face budget deficits. The Congressional Budget Office projects that states will receive $58 billion less from the federal government in fiscal year 2024 than in the previous fiscal year. That’s why Medicaid officials told KFF they expect state Medicaid spending to rise 7% in fiscal year 2025, even though enrollment is down about 4% statewide.

Additionally, McEvoy said Medicaid programs generate less tax revenue and policymakers will likely take a closer look at investments in Medicaid.

“I think this will definitely have an impact on whether programs can expand their service offerings, cover people in higher income brackets or pursue innovation projects,” McEvoy said.