Navigating the Implications of Proposed Changes to GLP-1 Medication Coverage

Introduction

The Centers for Medicare & Medicaid Services (CMS) has proposed changes to Medicare and Medicaid coverage for glucagon-like peptide-1 (GLP-1) medications, which are currently covered primarily for the treatment of type 2 diabetes. These medications have also gained attention for their effectiveness in managing obesity, although coverage for weight loss remains limited under Medicare and Medicaid today. The intent of this change is to drive improved health outcomes, which could have substantial benefits and downstream impacts, but if enacted, the proposed changes will expand coverage criteria, significantly impacting health plans in quick time.

Evolving CMS Policy on Anti-Obesity Medications

Historically, Medicare Part D excluded coverage for weight loss drugs under a statutory provision allowing Medicaid programs to do the same. CMS reinforced this stance in 2008, clarifying that even non-cosmetic weight loss agents were ineligible for Part D coverage. However, exceptions were made for medications treating conditions like AIDS wasting and cachexia, recognizing their broader therapeutic benefits.

The emergence of GLP-1 drugs, such as Ozempic and Wegovy, has challenged this framework. While originally approved for type 2 diabetes and cardiovascular disease, these drugs have demonstrated significant efficacy for weight loss, fueling public demand and legislative proposals to expand coverage. Medicare already covers GLP-1s for non-weight-loss indications, with spending on Ozempic alone reaching $4.6 billion in 2022. Medicaid policies vary by state, with 13 states covering GLP-1s for obesity as of August 2024.

In response, CMS has proposed a reinterpretation of the statutory exclusion, distinguishing between drugs “used for weight loss” and those “used for the treatment of obesity.” This shift would allow Part D and state Medicaid coverage for anti-obesity medications (AOMs) prescribed specifically for obesity.

Financial Impacts at Federal and State Levels

Federal Level

• Increased Spending: Medicare spending on GLP-1 medications could rise by $24–$37 billion over the next several years, depending on the breadth of the coverage expansion and member uptake rates. Medicaid spending could see increases of an estimated $15 billion over the next decade, with significant variability by state.
• Cost Offsets: Studies suggest GLP-1 medications can reduce healthcare costs for diabetes-related complications by 20%–30% annually per member. However, it may take several years for these savings to offset initial spending increases.

State Level

• Medicaid Budgets: States with high obesity and diabetes prevalence, such as Mississippi and West Virginia, could face disproportionate budget impacts, with projected increases in Medicaid drug spending annually.
• State Supplemental Rebates: States may need to renegotiate rebate agreements, with some states potentially achieving savings of up to 15% on GLP-1 medication costs through innovative pricing models such as outcomes-based contracts.

Anticipated Utilization Increases

• Expanded Eligibility: Coverage for obesity treatment could lead to a 40%–60% increase in GLP-1 utilization over the first two years, with an estimated 1.5–2.5 million additional beneficiaries initiating therapy annually across Medicare and Medicaid. An estimated 3.4 million Medicare beneficiaries and 4 million Medicaid beneficiaries could benefit.
• Chronic Disease Management: Increased use of GLP-1 medications may reduce the incidence of diabetes-related hospitalizations by 10%–15% and cardiovascular events by up to 20%, improving long-term population health outcomes.
• Provider Demand: Endocrinologists, dietitians and primary care physicians may experience appointment volume increases as patients seek guidance and prescriptions for GLP-1 therapies.

Cost Impacts to Health Plans

• Rising Pharmacy Costs: Health plans could face a 20%–35% increase in overall pharmacy spending for members with diabetes or obesity.
• Formulary Management: Expanding coverage criteria will require plans to refine formularies, potentially increasing formulary-related administrative costs.
• Risk Adjustment: Accurate coding and risk adjustment will become critical, with plans needing to account for increased annual GLP-1 costs per member.

Operational Impacts

• Care Management Programs: Plans must scale care management programs to handle up to 30% more members receiving GLP-1 prescriptions, requiring investment in digital tools and personnel.
• Prior Authorization Processes: Prior authorization requests for GLP-1 medications may double, prompting the need for enhanced automation and workflow efficiency.
• Member Communication: Plans must prepare targeted outreach campaigns members potentially eligible for expanded GLP-1 coverage.
• Provider Networks: Expanding network capacity to manage increased GLP-1 demand could require adding providers in key specialties like endocrinology and primary care.

How ProspHire Can Help

ProspHire brings expertise in navigating regulatory changes and optimizing health plan operations. We offer:

• Financial Impact Analysis: Forecasting cost impacts and developing mitigation strategies.
• Formulary Strategy: Supporting formulary adjustments to balance compliance and cost containment.
• Utilization Management: Designing efficient prior authorization and care management processes tailored to GLP-1 medications.
• Stakeholder Engagement: Building robust communication frameworks for members, providers and regulatory bodies.

With ProspHire’s guidance, health plans can navigate the complexities of CMS’s proposed changes with confidence, ensuring financial sustainability while delivering improved member outcomes.