Medicare Skin Substitutes Payment Reform

Summary#

This bill would change how Medicare pays for skin substitute products used to treat wounds. It creates a clear legal definition for “skin substitute products,” sets a per-square-centimeter payment rate for 2027–2030, adds rules on prior authorization and prepayment review for certain providers, and adds domestic sourcing and certification requirements. The stated policy goal is to standardize payment, limit inappropriate use, and collect information about the wound-care industry.

Key changes:

• New definition: “Skin substitute products” are defined by type and by how they are regulated, and most imported products must meet strict U.S. sourcing and distribution rules unless a short waiver is granted for shortages.
• Payment rate: For 2027–2030 Medicare payment is set at $457 per square centimeter. Medicare would pay 80% of the lesser of the provider’s charge or that payment amount.
• Provider purchase floor: For 2027–2030 Medicare will not pay for a product if the provider bought it for less than $342.75 per square centimeter.
• Use limits and rules: Payment limited to the “reasonable and necessary portion” (the greater of 350 cm2 or 120% of wound size); no payment for more than three distinct applications to the same wound if there is no clinical improvement; providers must hold specific wound-care certifications.
• Integrity rules: CMS must run prepayment claim reviews starting 2027, start prior authorization for certain providers by 2028, identify outlier providers (top 3% by payment), publish outlier lists, and refer suspected fraud to the Inspector General.
• Reporting and coding: A single billing/payment code must be created by Jan 1, 2027. HHS must report to Congress by Jan 1, 2030 on industry costs, access, and evidence of effectiveness.

What it means for you#

• Medicare patients needing wound care

  • Medicare will generally cover skin substitute products under the new rules, but patients will likely owe 20% coinsurance based on the allowed amount (Medicare pays 80% of the allowed amount).
  • Prior authorization and prepayment review could delay access when a provider falls into the “specified provider” categories.
  • If a provider applies more than three distinct treatments to the same wound without documented improvement, Medicare may not pay for further applications.

• Providers (wound clinics, hospitals, physicians)

  • Providers must meet one of the listed wound-care certifications to get paid for these products.
  • Providers that are outliers (top 3% by total payments) or that bill heavily for skin substitutes may face prepayment review, prior authorization, or possible enrollment revocation/exclusion if denial rates are high.
  • Payment will be limited to the defined “reasonable and necessary portion” of product used, with a billing floor of 350 cm2 for payment purposes in many cases.
  • If a provider purchased a product for less than $342.75 per cm2 during 2027–2030, Medicare will not pay for that product under this rule.

• Manufacturers and distributors

  • Most products will need to meet U.S. donor, manufacturing, and distribution rules to be eligible for Medicare payment, unless HHS issues a short waiver for a domestic shortage.
  • A single Medicare billing code will be created for these products, which could change how products are billed and reimbursed.

• Medicare program administration

  • CMS must implement prepayment review, prior authorization processes, create a billing code, publish outlier lists, and run a report on the industry by 2030.

Expenses#

The bill sets aside limited administrative funding but does not estimate overall Medicare spending changes.

• The bill directs transfers of $2,500,000 from the Medicare Supplementary Medical Insurance Trust Fund to CMS’s Program Management Account for each fiscal year 2028 through 2031 (total $10,000,000), to be used for carrying out prepayment review and related activities.
• No estimate is provided in the bill text of the net effect on Medicare spending (savings or increased payments) resulting from the new per‑centimeter payment, the floor on provider acquisition price, prior authorization, or other changes.
• The bill will likely create administrative and compliance costs for CMS, providers, and manufacturers (new billing code, prior authorization systems, attestations of domestic sourcing), but no dollar estimates are provided.

Proponents' View#

The bill appears intended to address several problems in the wound-care payment area:

• Standardize payment for skin substitute products by setting a per-square-centimeter rate for a defined period (2027–2030).
• Reduce inappropriate or excessive billing through prepayment review, prior authorization, outlier identification, and limits on repeated applications.
• Encourage or require domestic sourcing and controlled distribution to improve traceability and safety, while allowing short waivers for shortages.
• Improve oversight by requiring certification of providers and by directing CMS to collect data and report to Congress on costs, access, and evidence of effectiveness.

Opponents' View#

The bill raises several potential concerns based on its design:

• One concern is that prior authorization, prepayment review, and denial thresholds could delay or restrict patient access to needed treatments, especially where alternatives are limited.
• The domestic sourcing and distribution requirements could reduce the number of eligible products, potentially increasing costs or harming access if U.S. supplies are limited; the bill allows only short (up to 180-day) waivers for shortages.
• The rule that bars payment when a provider purchased a product for less than $342.75 per cm2 is unusual and may create perverse incentives (for example, discouraging providers from negotiating lower purchase prices) or create uncertainty about when Medicare will pay.
• It is unclear how the flat $457/cm2 payment will compare to the actual prices of different products; if the payment is lower than some product prices, providers may stop offering those products or shift costs to patients.
• Administrative burdens for providers and manufacturers (new billing code, attestations, prior authorization systems, certification checks) are likely but are not costed in the bill.
• The bill does not include an overall fiscal estimate of how the changes will affect Medicare spending.