GLP-1 Drugs Are About to Destroy Medicare Costs

Added: 2026-05-14

[00:00:00]Starting July 2026, which is just weeks away from when I'm recording this, Medicare in a roundabout way is going to start covering weight loss drugs like WGOI and Zepbound for the first time.

[00:00:10]And on the surface, this sounds like great news. And it is for many who are hoping to reap the benefits of these drugs. But here's what nobody's talking about. These drugs could fundamentally change the math that your Medicare premiums are built on. And I want to walk you through exactly why and what it means for you going forward. Now, let me be clear. I am not saying that Medicare is going bankrupt. I am not saying that your coverage is going to disappear.

[00:00:33]What I am saying is that these drugs create a serious problem that the insurance system hasn't had to deal with before. And understanding that problem puts you ahead of 99% of the people trying to navigate Medicare right now and looking to the future. So here's what's happening. In 2024, Medicare Part D spent 27.5 billion on GLP1 drugs. That is five times what it spent just five years earlier. And that was before weight loss was even a covered reason to prescribe them under Medicare. That 27.5 billion was almost entirely for diabetes and cardiovascular disease. Now, here's where the policy gets interesting and a little bit messy. In 2024, the Biden administration proposed a rule that would have expanded Medicare Part D coverage to include GLP1s for weight loss. This is significant because under current federal law that was established back in 2003 when Medicare Part D was created, it was clear that covering drugs prescribed solely for weight loss was and would be prohibited. That's not an insurance plan decision that is written into the law specifically by the Medicare Prescription Drug Improvement and Modernization Act of 2003. In April of 2025, the Trump administration chose not to finalize the Biden administration rule that would have expanded part D to include GLP1s for weight loss. So, for a while, it looked like Medicare coverage for weight loss still wasn't happening.

[00:02:00]Then, in November of 2025, the Trump administration announced deals with Eli Liy and Novo Nordisk to lower GLP-1 prices. And then in December of 2025, CMS introduced the balance model, a completely different pathway to get these drugs covered under Medicare. So instead of changing the Part D rules permanently, CMS is using what is referred to as a demonstration authority, essentially a pilot program to make this all happen. We have two programs here and it can get a little bit confusing. So the first is the balance model that I mentioned. This would be within Medicare Part D coverage and it is coming at some point in the future. The second is the bridge program. It is supposed to bridge coverage between July 2026 and whenever the balance model goes into full effect.

[00:02:47]So, starting this July of 2026, the Medicare GLP-1 Bridge program will cover drugs like WGO and Zepbound specifically for weight loss at a $50 per month co-pay for beneficiaries who meet certain clinical criteria, including getting a prior authorization from your doctor. That bridge runs through the end of 2027, and this is a new development because of the problem that I'm going to cover in this video. The bridge was initially only supposed to run until December 31st of 2026, so six months.

[00:03:19]And then in January 2027, the full balance model was supposed to kick in where individual Part D drug plans could choose whether to opt in and cover these drugs long term or not. However, a lot more Part D drug plan insurance companies than what CMS expected said, "No way. We want no part of this."

[00:03:37]Meaning that the balance model is not ready for January of 2027. Insurance companies have said, "We have no idea how many people will use this program."

[00:03:46]Which means that we don't know how to estimate the costs that we need to be prepared for, and we don't know how we're going to come up with the dollars needed to cover an unknown amount of risk. Estimates suggest that as many as 13.7 million Medicare beneficiaries could eventually become eligible based on obesity thresholds. Not all of them will qualify right away. But the point is is that the bridge program has certain specific criteria and then the balance model depends on which Medicare Part D insurance companies opt in. But the trajectory is clear. The eligible population is going to grow significantly. Now Medicare has covered expensive drugs for a long time, but historically expensive drugs have fallen into one of two categories. The first would be rare disease drugs. very expensive, but they treat a very small number of people. Think specifically cancer treatments. High cost, tiny population. The system can absorb it relatively efficiently. The second category would be common condition drugs. Think like blood pressure medications or statins. Huge patient populations, but relatively low costs per person. Again, the system handles it. Weight loss drugs don't fit into either bucket. They are moderately expensive. If we're talking about $245 per month at the negotiated Medicare price or just under $3,000 per year per person, they are chronic. Most people need to stay on them to maintain results potentially for years or decades. And many of these are designed to keep them on these medications for the rest of their life. Throw on top of that that all of these are now going to be able to apply to tens of millions of people.

[00:05:21]That combination, moderately expensive, chronic and long-asting, and mass market, is a formula to absolutely break health insurance. So, this specific niche of weight loss drugs in the coverage of them is an absolute beast.

[00:05:36]And here's where this hits your Medicare costs. Let's say that you're 66, you're on Medicare, and you don't take a GLP1, and you're not concerned with weight loss. You might be thinking, "Well, this doesn't really affect me." But it does because you're in the same insurance pool as everyone who does take one. A study published in the JAMAMA Health Forum projected the 10-year fiscal impact if Medicare covers GLP1s for obesity. The total estimated drug costs were $65.9 billion. The estimated health care savings from fewer hospitalizations, fewer surgeries, less diabetes management was $8.2 billion.

[00:06:12]The net cost or the loss to Medicare over 10 years was estimated at $47.7 billion. Now, that estimate was published before the $245 negotiated Medicare price was finalized. So, the actual number would shift, but the scale of the problem doesn't change. We're talking about tens of billions of dollars in net new costs to the Medicare system with some savings down the road, but not enough strictly from a dollar perspective to make up the difference.

[00:06:40]But what does $47.7 billion in new costs mean for your monthly premiums? Nobody knows the exact number yet, but the math only goes in one direction. Every additional dollar that Medicare spends shows up in one of three places. Your Medicare PartB premiums, your Medicare Part D premiums, or taxpayer funding.

[00:07:00]There is no fourth option. Whether you take these drugs or not, you're going to help pay for them. Here's why. Health insurance works because most people in the pool use relatively little care in a given year, while a smaller group has expensive medical events. The large healthy majority subsidizes the small expensive minority. That imbalance is what keeps premiums relatively stable.

[00:07:23]Weight loss drugs flip that model.

[00:07:25]Instead of a small group with high costs, you get a large group, potentially millions of beneficiaries, each adding thousands in recurring annual costs year after year after year.

[00:07:37]Even if those drugs prevent future heart attacks or joint replacements, and there's real evidence that they might, insurance doesn't price on a maybe later savings model. It prices on this year's claims. The costs are real, and they are immediate. The savings are theoretical and they are years away. So, what does this actually look like for you?

[00:07:55]Depending on the kind of Medicare coverage that you have, let's use a quick example. Let's say that you are Linda. You're 67 years old and you're on a Medicare Advantage plan in Arizona.

[00:08:05]You don't take a GLP1, but a large portion of the other members in your plan do or they will. If you're on a Medicare Advantage plan like Linda, here's the dynamic. Your plan has to decide whether to participate at all in the balance model coming in the future to cover these drugs. Right now, a lot of insurance companies are saying no. If your plan does opt in, they take on the cost of covering these drugs for potentially thousands of members. That cost has to come from somewhere. It often shows up as new or increased monthly premiums, reduced supplemental benefits, maybe your dental or your vision gets trimmed, higher co-pays on other services, a higher max out of pocket, and or maybe narrower provider networks. If we set GLP1 coverage aside for just a minute, we are already seeing these types of benefit changes right now without adding these additional costs.

[00:08:56]Many advantage plans, part D plans, and supplement plans are getting hammered right now without all of this. So throwing this on top of the existing market is like adding gasoline to a fire. Advantage plans that don't participate may look more attractive on price, but you won't have that GLP-1 coverage for weight loss through that plan if you were to ever need it. If you are on original Medicare with a standalone Part D drug plan, the dynamic is similar. The bridge program running through the end of 2027 is funded outside of your Part D plan. So, your plan isn't carrying the risk right now.

[00:09:27]That benefit isn't even run through your Part D plan. But that changes at the end of 2027 when plans that opt into the balance program bear those costs directly. Part D premiums will adjust.

[00:09:38]Co-pays, co- insurance, and the tiering of drugs will adjust. And you'll want to pay close attention during the open enrollment period and the annual enrollment periods in the fall to see which plans have opted in and what their premiums look like. If you have a metagap plan, your metag gap premium isn't directly affected by drug costs.

[00:09:56]Metagap doesn't cover prescriptions. In theory, if GLP1s reduce hospitalizations, other part A claims, diabetes, and other health issues over time, that could eventually help stabilize metagap rates. That's the optimistic case, but that's a theory.

[00:10:10]It's not a guarantee. In the meantime, you are still paying Part D premium separately, and those are subject to the cost pressures that we just talked about. No matter which path that you're on, nobody escapes the costs. It's going to show up as higher premiums, higher taxes funding Medicare, or tighter plan benefits. The bill doesn't disappear. It just gets spread across the system.

[00:10:31]Here's the bigger picture. This isn't really about OMIC or WGOI or weight loss. It's about a question that the health care systems globally have historically answered in one way.

[00:10:42]Private health care systems, universal health care systems, all of them. The question is how do you ensure a treatment that is preventive, that is effective, that is expensive, that tens of millions of people qualify for and that lasts a lifetime. The historical answer is you don't ensure that. But now the answer is maybe we'll try. And this is huge because this question is coming again. It's going to come for Alzheimer's prevention drugs. It's going to come for cancer risk reduction therapies. It's going to come for geneticbased therapies. Weight loss drugs haven't broken health insurance yet. But they are exposing something important. Health insurance and Medicare specifically were designed to cover rare catastrophic events, not mass market expensive chronic therapies that people take for decades. And as medicine gets better at preventing diseases instead of just treating it, this tension between it works and we can afford it is only going to grow. The important question isn't do these drugs work. The real question is can the system afford success at scale? Now, if you're approaching Medicare or you're on Medicare already and you're trying to figure out how changes like this affect your specific plan, that's exactly what we help people with each and every day.

[00:11:59]I put together a free Medicare guide that walks through everything parts A through D, Medicare Advantage versus Medicare supplement, enrollment timelines, costs, and how you can evaluate your options when things like this shake up the system. The link for that is in the description of this video. I leave secret code words at the end of my videos to help me with comment management. If you leave the secret code words in the comments, then I will know that you've made it to the end and I can take those comments a little bit more seriously. Now, I was a basketball player and I am currently a basketball coach at a local high school here and I have a basketball shoe collection problem. So, if you mention anything related to the basketball shoes or the collection or bonus points if you can name what any of these styles actually are, then I'll know that you've made it to the end of this video. Now, I made a video specifically about the bridge demonstration program and that balance model and all of the little details that you can watch right here. Thank you for making it this far. I will see you over there.