Medicare, Medicaid are set to cover GLP-1 drugs under a Biden administration proposal

In a major development for Medicare and Medicaid, the Biden administration has issued a proposal for the program to cover a class of weight-loss drugs that have become increasingly prevalent in society.

A proposed rule implementing Medicare Advantage and Medicare Part D technical and policy changes for 2026 includes a provision to reinterpret statutory language about weight-loss drugs. Under the reinterpretation, the class of medications known as GLP-1 receptor agonists would be covered as a treatment for obesity.

Currently, a Part D plan can cover those medications only when they are prescribed to treat specific conditions such as diabetes and cardiovascular disease, but that would change in a little more than a year under the proposed rule.

CMS also clarified that the new interpretation applies to Medicaid coverage, including for children 12 and older, although administration officials have not set a timeline for implementation by state Medicaid programs.

Coverage would be available to beneficiaries diagnosed with obesity. Those categorized as overweight still would require one of the designated comorbidities in order to be covered.

The proposed rule is scheduled for publication Dec. 10 and currently is available as a pre-publication draft. Comments on the rule are due by Jan. 27

An uncertain path forward

The mandatory 60-day comment period for the proposed rule means the Biden administration will not have final say on its implementation.

As such, while the administration expects thousands of stakeholder comments on the proposal, the key opinions arguably will be those of the leaders overseeing the U.S. health and healthcare infrastructure in the next Trump administration. Robert F. Kennedy Jr., the nominee for secretary of Health and Human Services, wants to tackle chronic diseases such as diabetes and obesity but has said popular weight-loss drugs such as Ozempic are not the right tool and are overpriced.

Conversely, Dr. Mehmet Oz, the nominee to lead CMS, commented on social media in support of GLP-1s last year. A decade ago, Oz came under congressional scrutiny for allegedly overhyping weight-loss products through outlets such as his eponymous TV show.

Popular opinion likely will be on the side of covering the drugs, which have well-documented clinical benefits. In a KFF tracking poll that was reported in May, 61% of roughly 1,200 respondents said Medicare should provide coverage for people who are overweight. The share was relatively consistent across age groups and political-party affiliations.

Stocks of Eli Lilly and Novo Nordisk, two leading manufacturers of GLP-1s, rose by 6% and 2%, respectively, after Tuesday morning’s announcement.

An expensive proposition

Coverage of GLP-1s would represent a substantial investment of federal spending. Administration officials project a cost of $24.8 billion for Medicare and $11 billion for Medicaid over the next decade, with state Medicaid programs contributing another $3.8 billion. Current list prices for the drugs are $1,000 or more per month for products such as Wegovy (Novo Nordisk) and Zepbound (Eli Lilly).

Out-of-pocket costs could decline by as much as 95% under the new coverage criteria, CMS leaders said, and premiums are not expected to rise as a result of the policy. About 3.4 million Medicare beneficiaries and 4 million Medicaid beneficiaries would be newly eligible for GLP-1 coverage under the proposal.

In October, the Congressional Budget Office (CBO) issued a report projecting that the federal government would need to spend $35 billion from 2026 through 2034 to cover GLP-1 use by Medicare patients. However, that’s under an illustrative scenario in which coverage is available to people who are classified as overweight, in addition to those who are diagnosed with obesity.

Thus, more than 12.5 million Medicare beneficiaries would newly qualify for coverage of the drugs in 2026. Utilization rates among beneficiaries would start at 2% (300,000) in 2026 and rise to 14% (1.6 million) in 2034. For the federal government, the healthcare savings from improved health and wellness would start at $50 million per year and reach $1 billion annually in 2034, according to the CBO.

“Relative to the direct costs of the medications, total savings from beneficiaries’ improved health would be small,” the CBO wrote.

The drugs may become even more popular in upcoming years, with pill versions expected to hit the market. Currently, GLP-1s are self-administered via injections.

Trends in the private sector

GLP-1s also are becoming more commonly covered in employer-sponsored plans, especially at larger companies. Among employers responding to a survey conducted by the Business Group on Health, 67% provide coverage of the drugs for obesity (80% of respondents have more than 10,000 employees).

The share drops when smaller employers are surveyed. An Oct. 9 article (login required) published in Health Affairs presented data from the KFF Health Benefits Survey and reported that among employers with at least 200 employees, 18% cover GLP-1s primarily for weight loss. In addition, 26% are very or somewhat likely to add coverage over the next year.

Among companies with 5,000 or more workers, 28% covered the drugs for weight loss. Of the subset that provided coverage, 53% imposed conditions or requirements such as case management (i.e., meeting with a professional before receiving a prescription) or enrollment in a lifestyle or weight-loss program.

In a September webinar hosted by HLTH, panelists described concepts that can work for employers seeking to take a cautious approach to coverage. Ideally, they said, prior authorization would not be deployed, given that it can pose significant obstacles to utilization.

Instead, employers can consider:

• Gold card programs for preferred providers
• Step therapy that entails rigorous consideration of clinical evidence and transparent patient communications
• Customized clinical programs that offer an alternative or a complement to drug-based treatment