Key Points
Under current law, Medicare and Medicaid cover anti-obesity medication with a Body-Mass Index (BMI) of 30 or more who also suffer from diabetes or other weight-related conditions. The proposed rule change would lower the BMI requirement to 27 with weight-related conditions, include coverage for more obese beneficiaries with a BMI of 30 or higher, and eliminate state-level discretion over whether to cover anti-obesity drugs.1
PWBM estimates a 10-year conventional cost of $140 billion over 10 years based on our projected take-up rates, effective patent expirations, and growing price competition before those expirations. This projection could more than double if price competition fails to materialize over time.
PWBM will conduct future work to estimate the potential cost savings or additional costs stemming from longer life expectancy, enhanced productivity, and reduced health spending associated with obesity.
Authorizing Medicare and Medicaid to Cover Anti-Obesity Medication
As shown in Table 1, PWBM estimates that the proposed rule change would increase Medicare outlays by $55.5 billion over the 10-year budget window and Medicaid outlays by $84.2 over the same period. We estimate the newly eligible population based on current and expanded eligibility rules and projections for the growth of obesity. In 2026, 14 million Medicare beneficiaries and about 33 million Medicaid beneficiaries would be newly eligible for anti-obesity medication. We project an initial take-up rate of 3 percent, but take-up rates will grow rapidly, reaching 31 percent in 2034.2 In 2026, there will be an additional 0.1 million Medicare beneficiaries using anti-obesity drugs and another 0.3 million Medicaid beneficiaries.3 By 2034, an estimated 9 million additional Medicare beneficiaries and 18 million additional Medicaid beneficiaries are expected to use anti-obesity drugs.
We estimate that the average annual cost per user of anti-obesity drugs will decline significantly over the next decade as Medicare starts negotiating prices for those drugs, new compounds enter the market, and some current brand-name drugs lose their patent protection.4 We project that the average annual cost per user decreases from $5,300 to $860 for Medicare. The average cost per user for Medicaid would be 75 percent of that amount, with the remaining 25 percent paid by the states.5
| 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | 2034 | 2025-2034 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Newly eligible beneficiaries (millions of people) | ||||||||||||
| Medicare | 0.0 | 0.0 | 13.6 | 14.0 | 14.3 | 14.6 | 14.8 | 15.1 | 15.3 | 15.5 | 15.7 | |
| Medicaid | 0.0 | 0.0 | 32.9 | 32.7 | 32.4 | 32.1 | 31.8 | 31.5 | 31.0 | 30.5 | 30.2 | |
| New anti-obesity drug users (millions of people) | ||||||||||||
| Medicare | 0.0 | 0.0 | 0.1 | 0.5 | 0.9 | 1.6 | 2.6 | 3.7 | 5.2 | 6.9 | 8.9 | |
| Medicaid | 0.0 | 0.0 | 0.3 | 1.1 | 2.2 | 3.7 | 5.7 | 8.1 | 11.0 | 14.4 | 18.3 | |
| Average annual federal cost per user | ||||||||||||
| Medicare | $5,600 | $3,700 | $3,800 | $3,600 | $2,960 | $2,730 | $2,400 | $840 | $860 | |||
| Medicaid | $3,920 | $2,590 | $2,660 | $2,520 | $2,072 | $1,911 | $1,680 | $588 | $602 | |||
| Subtotal (in billions) | ||||||||||||
| Medicare | 0.0 | 0.0 | 0.8 | 1.7 | 3.6 | 5.9 | 7.6 | 10.2 | 12.4 | 5.8 | 7.7 | 55.5 |
| Medicaid | 0.0 | 0.0 | 1.4 | 2.8 | 5.8 | 9.3 | 11.7 | 15.4 | 18.4 | 8.4 | 11.0 | 84.2 |
| Total (in billions) | 0.0 | 0.0 | 2.2 | 4.4 | 9.3 | 15.2 | 19.3 | 25.6 | 30.8 | 14.2 | 18.7 | 139.7 |
This analysis was produced by Felix Reichling under the direction of the faculty director, Kent Smetters. Mariko Paulson prepared the brief for the website.
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Under current law, states have the discretion to decide whether to cover anti-obesity drugs. Currently, 13 states cover GLP-1 drugs for obesity treatment, 4 states cover GLP-1 drugs but not for obesity treatment, and 34 states (including Washington, DC) do not cover GLP-1 drugs. See https://www.kff.org/medicaid/issue-brief/medicaid-coverage-of-and-spending-on-glp-1s/. As a result, Medicaid eligibility will increase significantly more than Medicare. ↩
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We assume that take-up rates will grow at the same annual pace observed for statin use following the implementation of the 2013 ACC/AHA guidelines. During that period, statin use rose from 14 percent of the population in 2013 to 35 percent in 2019, reflecting an annual increase of approximately 3.4 percentage points. This estimate may be conservative, as anti-obesity drugs could provide a broader spectrum of benefits compared to statins, which specifically target high cholesterol. See https://pmc.ncbi.nlm.nih.gov/articles/PMC10203693/. ↩
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We estimate that 65 percent of individuals starting anti-obesity medication will discontinue use within the first year, primarily due to potential side effects. By 2034, this discontinuation rate is projected to decline to 50 percent. ↩
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Semaglutide, the active ingredient in Ozempic and Wegovy, is protected by multiple patents with varying expiration dates. The core patents for semaglutide are set to expire in 2026. However, additional patents, such as those covering specific formulations and delivery devices, extend protection until 2033. Consequently, the availability of generic versions in the U.S. is anticipated around 2033, following the expiration of these extended patents. ↩
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The fraction of Medicaid program costs covered by the federal government varies based on the Federal Medical Assistance Percentage (FMAP), which depends on each state's average per capita income relative to the national average. Under the standard FMAP, the federal government covers at least 50 percent of Medicaid costs for every state, and this percentage can go as high as 83 percent for states with lower per capita income. Under the enhanced FMAP, the federal share can be higher for specific populations and programs (e.g., children under the Children’s Health Insurance Program or Medicaid expansion under the Affordable Care Act). The federal government initially covered 100 percent of costs for Medicaid expansion populations, but this gradually reduced to 90 percent as of 2020. In 2022, the federal government financed approximately 71 percent of total Medicaid spending, with states covering 29 percent (see https://www.kff.org/medicaid/issue-brief/medicaid-enrollment-spending-growth-fy-2024-2025/). CMS expects the federal government to cover 75 percent of the cost of anti-obesity drugs (see Table 31 in https://public-inspection.federalregister.gov/2024-27939.pdf). ↩