Going after Medicare abuse is like playing whack a mole. Just when you think you have made some headway another mole pops out. The Biden Administration, and now the Trump Administration, is moving to limit the use – and limit the price paid – for so-called skin substitutes in Medicare. Skin substitutes are newfangled bandages. Their purpose is to heal hard to treat wounds. Critics charge there is little evidence that they work, or little evidence that they are a benefit in the myriads of cases in which they are used. The following is from the New York Times:
Spending on skin substitutes has increased fortyfold in the past five years, surpassing $10 billion in 2024. That sharp increase is one of the largest examples of Medicare waste in the program’s history, according to data analysts and industry experts.
Medicare, the government insurance plan for seniors, spent more last year on the bandages than on ambulance rides or anesthesia, despite limited evidence that they work. The bandages are made from dried bits of placenta and are used on wounds that won’t heal.
You may wonder, if evidence of efficacy is limited, why has the use of skin substitutes increased by 40 times since 2020? It is all due to perverse incentives.
For years, lax Medicare rules have allowed makers of the bandage to essentially set their own prices. Companies have brought more than 100 new versions to market since 2023, some costing Medicare more than $21,000 per square inch.
…The New York Times reported on this year: Doctors can buy the coverings at large discounts and then charge Medicare the full sticker price, pocketing the difference.
Some doctors have earned tens of millions of dollars for relatively simple procedures that involve making house calls to apply the bandages.
Bandage makers are not allowed under federal law to bribe or pay kickbacks to doctors using their products. Indeed, drugmakers are not even allowed to give copay gift cards to seniors to assist with the cost of expensive drugs (something allowed outside Medicare). A way around these anti-kickback statutes is by making the doctor the bandage vendor. Medicare is now proposing paying a fat rate of $806 per inch.
As I discussed in an earlier post, Medicare is also beginning a pilot project in six states where providers will have to seek prior authorization for some services. More from NYT:
In June, Medicare announced plans to test a prior authorization process for skin substitutes: Doctors in six states would need to prove to Medicare that the treatment was medically necessary before applying the bandages.
There is a fine line between quality care, unnecessary care and waste, fraud, and abuse. Lucrative reimbursements can induce providers to use the costly skin substitutes in circumstances they may otherwise not use them. The Justice Department recently announced it is prosecuting multiple providers for improper use of skin substitutes. Two podiatrists from Texas stand accused of billing Medicare $90 million for unnecessary skin substitutes over the course of several years. That is probably the tip of the iceberg. Now the Centers for Medicare and Medicaid Services needs to start looking for more icebergs.
NYT: Trump Administration Will Limit Medicare Spending on Pricey Bandages