GLP-1s as the Stress Test

GLP-1 receptor agonists are the clearest current test of whether American health care can absorb an effective, expensive therapy for a very large population. Every structural tension this course has covered appears in this one class.

The spending trajectory

Medicare. Gross Part D spending on GLP-1s in 2024 totaled $27.5 billion, a fivefold increase from 2019. More than half of that gross spending was on semaglutide products, with Ozempic alone at 47 percent, and nearly a quarter on Mounjaro.

Medicaid. Gross spending rose from about $1 billion in 2019 to almost $9 billion in 2024, a ninefold increase. Prescriptions rose “sevenfold, from about 1 million in 2019 to over 8 million in 2024,” and gross spending per GLP-1 prescription reached $1,000 in 2024.

As the previous lesson insisted: these are gross figures. Rebates are substantial, and one manufacturer reported that “rebates and other fees (across all payers) accounted for about 40% of the cost” of its products.

Coverage is retreating, not expanding

The instructive part is what payers did as the spending grew.

13 state Medicaid programs covered GLP-1s for obesity treatment under fee-for-service as of January 2026. Four states, California, New Hampshire, Pennsylvania, and South Carolina, eliminated obesity coverage after October 2025, “likely reflecting recent state budget challenges and the significant costs associated with coverage.” North Carolina eliminated coverage in October 2025 and reinstated it in December 2025.

Employers show the same pattern. Many “have considered scaling back coverage of GLP-1 agonists for weight loss, or in some cases, employers are adding or strengthening coverage requirements.”

Medicare’s situation is different again: gross spending is skyrocketing even though Medicare’s statutory exclusion means it cannot cover these drugs for weight loss, so the spending reflects diabetes and other approved indications.

Why this is genuinely hard

The usual value-based framing does not resolve it. This is not a case of low-value care to be eliminated.

• The drugs work. That is why demand is what it is.
• The eligible population is enormous, which is what makes the arithmetic impossible rather than merely expensive.
• The benefits accrue over years while the cost is immediate, and the employer course established that median employee tenure of 3.9 years truncates exactly that payback.
• The party paying is often not the party who benefits later, since a Medicaid enrollee may age into Medicare and a commercial member may change jobs.

Worth remembering: GLP-1s expose a limitation in value-based care that the field does not discuss enough. Value-based payment is built to remove waste, and it is genuinely good at that. It has no mechanism for a therapy that is effective, appropriate, and unaffordable at population scale. When the problem is that good care for everyone who qualifies costs more than the system has, no payment model solves it. What happens instead is rationing, through coverage exclusions, prior authorization, eligibility criteria, and state budget decisions. Watching four states drop coverage in a single quarter is watching that happen. Recognizing when you are facing an affordability problem rather than an efficiency problem is the difference between a realistic strategy and a wasted year.

Key takeaways

• Gross Medicare Part D GLP-1 spending reached $27.5 billion in 2024, fivefold above 2019.
• Gross Medicaid spending rose from about $1 billion to almost $9 billion over the same period, at $1,000 per prescription.
• 13 state Medicaid programs covered GLP-1s for obesity as of January 2026, and four states dropped coverage after October 2025.
• The problem is affordability at population scale rather than waste, which no payment model resolves.

Sources

• KFF, Medicaid Coverage of and Spending on GLP-1s (opens in a new tab)
• KFF, Recent Trends in GLP-1 Use and Spending in Medicare (opens in a new tab)