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Medicaid Coverage for Obesity Medications: Utilization and Net-of-Rebate Spending
We document state variation in Medicaid coverage for obesity-indicated GLP-1 medications over time, and use a stacked difference-in-differences design to estimate the effects of coverage on utilization and net-of-rebate spending. Nine quarters out, coverage increases prescriptions for obesity-indicated GLP-1 medications by 0.82 per 100 enrollee-months (SE = 0.10). Coverage had no effect on GLP-1 prescribing for diabetes or cardiovascular indications, suggesting that off-label prescribing of diabetes formulations for obesity is not very common in the Medicaid program. The expansions do not appear to affect consumer spending at major online GLP-1 compounding firms, which suggests that the utilization response in our main analysis reflects new utilization rather than crowd-out. We find that coverage increases net-of-rebate Medicaid spending by $751.6 per 100 enrollee-months (SE = $92.0), compared to $986.9 in gross reimbursements―manufacturer rebates reduce the state’s net spending by approximately 24 percent. Across the 17 states that ever covered obesity-indicated GLP-1 medications by mid 2025, coverage increased Medicaid net spending by around $2.68 billion per year. Extending Medicaid coverage in the remaining states would generate a further $3.63 billion in annual net spending.
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