CBO Estimates Medicare Coverage of Weight-Loss Drugs

In a much-anticipated release, the Congressional Budget Office (CBO) published projections estimating it would cost Medicare an additional $35 billion from 2026-2034 to cover anti-obesity medications (AOMs).

Currently, all drugs for weight loss, including drugs in the glucagon-like peptide-1s (GLP-1s) class, like Wegovy and Saxenda, are not covered by Medicare – a prohibition dating back to the Medicare Modernization Act of 2003. CBO projects that legislation repealing the prohibition would increase drug spending by $38 billion, with offsetting health savings of $3 billion, over the 2026-2034 period.

GLP-1 drugs were originally used for the treatment of diabetes and are covered by Medicare for that indication under different brand names (like Ozempic). These drugs are also now covered for those with obesity and one weight-related comorbidity, such as diabetes or heart disease. CBO recently increased its estimate of Medicare Part D spending by $36 billion over ten years to account for this coverage.

When combined with broader approval for weight loss through legislation similar to the initial version of the Treat and Reduce Obesity Act (TROA) introduced by Representative Brad Wenstrup (R-OH) in the Ways and Means Committee, CBO expects Medicare would be spending over $70 billion for the next decade just for this class of drugs. However, TROA has been amended in an attempt to reduce costs by limiting Medicare coverage of the drugs just to individuals who have been taking the drugs for at least a year under insurance coverage prior to entering Medicare. The bill now is expected to cost $1.7 billion over ten years.

CBO suggests that while there would be some health care savings from increased AOM usage due to a reduction in obesity-related health problems, those savings would not be nearly enough to “pay for” the increased spending on the drugs themselves. Estimated savings in the first year of coverage are very small – about $50 million – and grow to $1 billion in the final year of the decade.

Over the second decade (2035-2044), CBO suggests the savings would grow to be greater than the $3 billion in total from the first decade. Cost growth would also slow as various factors lead to relatively lower prices on the drugs; however, total government costs would still outweigh savings.

CBO stressed its projections are subject to many sources of uncertainty, particularly the assumptions about uptake and health outcomes for this entirely novel class of drugs without an analog in terms of effectiveness and long-term usage.

The price of these drugs is another source of uncertainty. Importantly, this analysis assumes some AOMs will soon be subject to the drug price negotiations implemented under the Inflation Reduction Act (IRA), which CBO estimates would reduce the price-per-user of the drugs by 32 percent after 2027. If the IRA provisions governing negotiations are altered or repealed, the drug prices would be higher, leading to higher costs for Medicare coverage.

These drugs are expensive for the federal budget, taxpayers, and Medicare beneficiaries. However, the efficacy of AOMs is groundbreaking with the potential to lead to substantial health improvements. If lawmakers deem that Medicare coverage of these drugs is worthwhile, they should fully pay for the expected cost of doing so.