Medicaid coverage for blockbuster weight loss medications is likely straining state budgets across the country to the tune of hundreds of millions per state each year, according to a new analysis.
Only 17 states covered GLP-1 weight loss drugs, such as Wegovy and Zepbound, for their Medicaid enrollees in 2025, but on average, these states together pay nearly $2.7 billion per year, according to a new analysis from Indiana University researchers.
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Medicaid, the largest source of health insurance coverage in the United States, covers one in five low-income Americans, including nearly 80 million children, adults, seniors, and people with disabilities. The program is funded jointly by the federal government and individual states, but each state determines what to cover.
Medicaid enrollees could also benefit from access to this revolutionary class of weight loss drugs, as roughly 40% of adult Medicaid patients meet the diagnostic criteria of having a BMI over 30, a standardized metric for obesity.
Wegovy and other GLP-1 medications have been clinically shown to decrease heart attack and stroke risk and kidney disease, as well as a variety of other less-substantiated effects, such as aiding in addiction recovery and decreasing sleep apnea.
But the high sticker price for Wegovy, produced by Novo Nordisk, has made many states decide it is not worth the costs, with Medicaid already taking up the largest chunk of each state’s budget each year.
As of January 2026, four of the 17 states — California, Pennsylvania, New Hampshire, and South Carolina — stopped paying for Wegovy for their Medicaid patients as of Jan. 1, citing budget constraints.
A new working paper circulated this week by the National Bureau of Economic Research analyzed Medicaid drug usage data to estimate the costs of GLP-1 drugs for each state’s program.
Coady Wing, professor at the Indiana University Bloomington School of Public and Environmental Affairs, and his co-authors used complex economic modeling to use Centers for Medicare and Medicaid Services data to annualize the cost of GLP-1 drugs for each state.
Wing and his colleagues estimated the amount Novo Nordisk discounts Wegovy for state Medicaid programs to determine the net costs of the drug for each state. From there, they were able to estimate the number of enrollees on GLP-1 per month for each state that covered the drug in 2025.
On average, states that covered the drug saw their net costs increase by roughly $750 per 100 enrollees each month.
The combined total for all 17 states analyzed was roughly $2.68 billion for one year of coverage, with California paying the most at over $1 billion annually.
But the researchers predicted it would cost even more for the states that had not already started GLP-1 coverage to offer it as a new benefit to their Medicaid enrollees.
The annual price tag varied greatly depending on the number of enrollees in each state, with New York topping the list at nearly $530 million and Wyoming coming in last at less than $5 million.
But, combined, the 33 states would end up spending more than $3.6 billion each year if they were to start covering the drugs once their programs were up and running.
The paper does not examine whether covering GLP-1 weight loss drugs will save Medicaid programs money in the long term by preventing enrollees from developing costly complications from obesity, such as heart attack, kidney disease, and diabetes.
But economic modeling for other insurance providers indicates that GLP-1s do not pay for themselves, at least in the medium term.
The Congressional Budget Office found in 2024 that if Medicare for seniors over age 65 were to start covering GLP-1 medications for weight loss, it would be a net cost of $35 billion over the first 10 years. The costs of purchasing the drugs and their corresponding usage would have been $38 billion, with an offset health savings of $3 billion over the decade.
Wing and his colleagues, in a different working paper released earlier this year, conducted an analysis of GLP-1 cost savings using private employer-sponsored insurance data, which found similar results.
Wing said starting a GLP-1 and sticking with it for five years would add about $100 per month to a patient’s out-of-pocket costs on average.
One possible explanation for this is that new patients on a GLP-1 need increased monitoring from their healthcare provider to ensure the dosage is correct and there are no problematic side effects, a factor that Wing says might diminish over time as more healthcare providers get used to working with the drug.
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Nevertheless, Wing said that private insurers and policymakers should not “throw the baby out with the bathwater.”
“You should take the price you pay for the drugs as a given and not imagine that they are cheaper because you’re going to save money somewhere else on the docket,” Wing said. “The question is whether you want to cover them because they’re worth it on their own.”
