Medicare-Covered Ozempic and Long-Term Care Would Be Very Pricey

Healthcare promises always come with high costs.

It's no surprise that campaigning for office is largely a matter of buying votes with unrealistic promises of largesse to be funded—if the promise is ever fulfilled—on the backs of those to be named later. As befits a particularly awful election season, 2024 features some true doozies when it comes to pie-in-the-sky promises. But among them are new schemes to relieve people of covering their own healthcare costs by having Medicare pick up the tab for weight loss drugs and in-home, long-term care.

Drugs That Cure Obesity—at a Price

With 41.9 percent of Americans adults obese, according to the Centers for Disease Control, Ozempic, Wegovy and other GLP-1 weight loss drugs have soared in popularity. As many as one in eight Americans have tried these drugs, which promise to succeed where dieting, exercise, and willpower often fail. And, in fact, obesity rates do appear to have turned a corner, dipping down after years of the population getting ever more massive. Weight loss drugs may have made the difference.

But nothing comes without a cost, and the price tag for these drugs is substantial. "A monthly supply of Ozempic costs almost $1,000 before discounts or rebates," Bloomberg reported in May. That said, those discounts and rebates can make a big difference in a medical system where prices are as slippery as those in a Middle Eastern bazaar. A 2023 paper by the American Enterprise Institute found that for weight-loss drugs, "net prices received by drugmakers are 48–78 percent lower than list prices."

Still, there's no bargain like having the tab picked up by Uncle Sugar (even if that just moves it over to everybody's tax bill). And that's exactly what federal lawmakers facing the voters have in mind.

"Should the legislation become law, the implications could extend beyond seniors," claimed the office of Rep. Paul Ruiz (D–Calif.) as he announced the bipartisan Treat and Reduce Obesity Act with other lawmakers, including Rep. Brad Wenstrup, (R–Ohio). "Medicare coverage might prod other health insurers to pay for weight-loss medications, as private health plans tend to follow Medicare's lead."

As that statement suggest, the legislation—which currently has 117 cosponsors—would extend Medicare coverage to weight loss drugs, something currently prohibited.

That's not to say that Medicare isn't already paying for Ozempic. This class of drugs was developed to treat type 2 diabetes, and Medicare covers it for that use. In March, coverage was extended to use of the drugs for cardiovascular issues. And off-label use of drugs is common. Earlier this year, KFF, which covers health issues, reported that "Medicare spending on the three newest versions of these diabetes medications that have also been recently approved for weight loss—Ozempic, Rybelsus, and Mounjaro—has skyrocketed in recent years, rising from $57 million in 2018 to $5.7 billion in 2022."

Formally approving Medicare coverage of these drugs for controlling weight will open the floodgates of expense. Working from its own lower estimates of Medicare spending on what it calls anti-obesity medications (AOMs), the Congressional Budget Office (CBO) sees costs quadrupling. "Total direct federal costs of covering AOMs would increase from $1.6 billion in 2026 to $7.1 billion in 2034."

Advocates of coverage expect savings from reducing obesity and resulting healthcare costs, but the CBO isn't impressed by the tradeoff. "Total savings from beneficiaries' improved health would be small—less than $50 million in 2026 and rising to $1.0 billion in 2034."

Keep in mind that Medicare is a massive entitlement problem with even bigger fiscal woes—it's already going bankrupt. But the burdens of covering weight loss drugs pale in comparison to Democratic presidential candidate Kamala Harris' scheme to have Medicare cover in-home, long-term care.

The High Cost of In-Home Care

"There are so many people in our country who are right in the middle," Harris told the audience of ABC's The View earlier this month. "They're taking care of their kids and they're taking care of their aging parents, and it's just almost impossible to do it all, especially if they work."

Harris's proposal could be a popular one, since caring for elderly relatives is expensive. According to KFF, home health aides cost $68,640 per year, on average. Medicaid currently pays for about 60 percent of long-term care in the U.S., covering costs for people with limited resources. Extending coverage through Medicare would further increase costs for a system that, once again, is already in crisis.

A Brookings Institution proposal for a "conservative" program would cost "around $40 billion annually." The report concedes that "turning the dials more generously would, of course, cost more."

Harris claims Medicare coverage for long-term care can be paid for by negotiating better prices on drugs. But as the Cato Institute's Michael Cannon points out, that's an implicit admission that Medicare is inefficiently wasting money.

"If that's how much waste government health programs create and tolerate, then what does that say about the wisdom of using those savings to create a new government health care entitlement?" he asks.

"In all likelihood, Harris's new health care entitlement will exhibit the same staggering rates of wasteful spending as the existing health care entitlement whose waste she hopes will provide the funding," Cannon adds.

Costs Soar When Coverage Drives Demand

KFF estimates that 14.7 million Medicare beneficiaries could be eligible for Harris' home care plan. But one overlooked aspect of extending third-party coverage to anything, whether it's weight loss drugs or in-home, long-term care, is that it largely divorces people from the cost of what they consume. And people want more when they don't have to foot the bill.

"Third parties provide the bulk of medical payments in the U.S.," Wofford College economics professor Timothy Terrell wrote in 2014. "This separation of consumption and payment makes people act as though they are receiving low-cost or even free services."

With the government—meaning taxpayers and out-of-control borrowing—picking up the tab, third-party coverage is likely to drive much greater demand for Medicare-subsidized Ozempic and home health aides. After all, if somebody else is willing to pay, why not grab as much as possible?

That's true of private insurance as much as for Medicare. But insurance companies don't bankrupt entire countries when they go under. Medicare is a massive, tax-funded system already collapsing under years of political promises. It's expected by its Board of Trustees to become insolvent in a decade.

Both these Medicare expansions require changes to law that may never pass. But they could, and that will cost us. Politicians' vote-buying plans are getting very expensive.