California recently passed a budget for 2025-2026 that eliminates Medicaid coverage for GLP-1 agonists for weight loss. Other states are considering similar cuts. States are struggling to close gaps in budgets. Enactment of The Big Beautiful Bill will likely add pressure on budget finances. It’s hard to envision a scenario in which state Medicaid agencies expand coverage of weight loss treatments in the short term.
About 40% of adult Americans are considered obese. Rates of obesity have been steadily on the rise since 1980. The Harvard T.H. Chan School of Public Health reminds us that obesity increases the risk of developing conditions such as diabetes, heart disease, osteoarthritis and several cancers.
Medications known as glucagon-like peptide-1 agonists, or GLP-1s, have become very popular as weight loss agents. Taken in accordance with the instructions on the label and an appropriate diet and exercise regimen, GLP-1s are effective at lowering a person’s weight.
However, payers in both the commercial and public sectors often balk at coverage. Commercial insurance coverage is improving but still isn’t universal by any means, whether in the employer-sponsored segment or individual market.
In the federal insurance program for the elderly and some disabled persons, Medicare, coverage of GLP-1s for weight loss alone is prohibited, though obese patients can get the semaglutide-based product, Wegovy, covered for heart disease.
Medicaid, a federal-state partnership that provides health coverage for low-resourced people, generally doesn’t reimburse GLP-1s for obesity. Only 14 states cover obesity medications in their state Medicaid plans. And like California, other states have proposed cutting coverage for obesity medications or have already done so, whether in the Medicaid program itself or state employee plans. For example, North Carolina and West Virginia have recently eliminated coverage of GLP-1s for weight loss for state employees due to cost concerns.
With significant Medicaid cuts in federal budget outlays as a result of passage of The Big Beautiful Bill, it is likely more states will follow suit. The law severely restricts how states pay for their share of Medicaid costs. To illustrate, states have long used healthcare provider taxes and certain special payment arrangements to fund their portion of the program. Yet the new legislation limits these financing tools, effectively shifting hundreds of billions in costs to state budgets.
States that do opt to cover various weight loss treatments, including medications, nutrition programs and bariatric surgery, almost invariably deploy restrictive eligibility requirements around things like body mass indices and the presence of co-morbidities, along with the use of prior authorization and step edits. This means, for instance, that individuals wanting to access treatments must attest to “increased exercise activity” and submit documentation proving that they’ve tried and failed to lose weight after receiving nutrition counseling and going on a strict, low-calorie diet.
In light of budget constraints, steep cuts to a wide range of Medicaid benefits are probable in the short term. This may come in the form of even more severe limits on coverage of medicines and other healthcare technologies, including obesity treatments.
It’s possible that through a voluntary demonstration project that the Centers for Medicare and Medicaid Services announced last month, some state Medicaid agencies could soon elect to cover these drugs for “weight management.” But the plan has not been finalized. Nor have any details been divulged besides the fact that it would commence in April of next year for Medicaid. Without information on how state programs would be incentivized to sign up, it’s unclear who would be interested.
The perennial issue for all types of payers is money. Once these therapeutics are covered by insurance, they tend to blow up budgets. Many payers in the commercial sector cite serious budgetary concerns. A survey released this spring of employer-based plans shows that GLP-1 drugs used for obesity account for an average of 10.5% of total annual claims. And if Medicare were to lift its prohibition on coverage, it would cost the program a cumulative $35 billion from 2026-2034. While the estimates included possible savings from improved health, these were not nearly sufficient to offset the costs of the medications.
Such projected expenses haven’t been calculated specifically for Medicaid. But the churn or enrollee turnover is so high in Medicaid that any longer-term, downstream cost savings would be very hard to come by, further exacerbating the budgetary problem.
While cost is a primary consideration for payers, lack of persistence on GLP-1s is another reason for hesitance to reimburse weight loss drugs. Patients who are treated with GLP-1s tend to discontinue at a relatively high rate. One study cited by federal government policymakers found that approximately 53% of patients with overweight or obesity taking semaglutide-based products didn’t persist on treatment past two months. Starting and stopping on these medicines so soon yields little or no benefit to patients and only adds costs for payers.
It’s possible that employers, commercial insurers and payers in the public sector—including Medicaid—decide to eventually revisit their coverage decisions if net prices of GLP-1s decrease sufficiently, combined with more data showing the benefits of weight loss drugs when taken consistently and persistently in conjunction with an appropriate dietary and exercise regimen. Until that time, however, coverage will continue to be a major hurdle.
