Medicare is plagued by waste, fraud, and abuse. I have written about questionable spending numerous times in the past. From unnecessary orthopedic leg braces, to unneeded urinary catheters, to Medicare hospice where patients routinely outlive the six months period they’re only supposed to survive, even to healthy patients unknowingly entered into hospice which is then billed to Medicare. Medicare beneficiaries sometimes discover they were fraudulently enrolled in hospice when they are turned down for therapeutic care.
Last year I wrote about exploding spending on skin substitutes, saying:
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.
In 2024 Medicare’s cost of skin substitutes was up by forty times from five years earlier. A loophole in Medicare’s reimbursement formula allowed doctors and suppliers to set their own price for these newfangled bandages. In 2019 skin substitute bandages cost around $1,000 an inch (far too much). Guess how much the purveyors of skin substitutes decided they should be paid by 2024? Around $21,000 an inch. Of course, they also decided that just about any wound would benefit from a skin substitute bandage. As a comparison, go to the medicine cabinet above your toilet and take out a Band-Aid. The standard adult size ones are about one square inch in surface area. Imagine the cotton gauze mesh is saturated with sterilized placenta and you got a $21,000 bandage. The Trump Administration closed the loophole in 2025 capping the price at an unreasonably high $806 per inch.
Doctors could essentially buy the bandages at a huge discount after rebates, charge Uncle Sam full price and then the manufacturer would quietly refund a large part of the cost into shell accounts that suppliers helped doctors set up. The New York Times investigated skin substitute abuse a year ago in 2025 and (a year later) some of the (alleged) fraudsters were arrested:
A significant share of Medicare’s skin substitute spending went to Legacy Medical Consultants, a company based in Fort Worth, Texas, that made at least $2.6 billion from the federal health program.
Legacy’s vice president of sales, Brian Rowan, was charged Monday with “offering illegal kickbacks, bribes and rebates” to providers that used Legacy Medical’s skin substitutes. He was arrested Monday. The Justice Department estimated that he earned $24 million from the scheme.
Also arrested in a separate case was a nurse practitioner, who owned a chain of wound care clinics. She allegedly accepted kickbacks from skin substitute manufacturers and paid a share of the kickbacks to local doctors to refer her patients to plaster with skin substitutes. More from NYT:
The government alleged that she sometimes applied skin substitutes to patients who were in hospice and terminally ill, raising questions about whether the treatment was necessary since the wounds were unlikely to heal before their deaths.
The charging documents say Ms. Yukee’s clinics typically submitted more than $1 million in skin substitute claims per Medicare patient, an extremely high amount. Overall, prosecutors estimate she was paid $297 million for false and fraudulent claims.
This is the tip of the iceberg and just one example of many types of waste, fraud, and abuse. For every dollar of outright fraud there is probably an order of magnitude more abuses, which are likely eclipsed by unnecessary waste. CMS should beef up the Office of Inspector General and aggressively pursue cases much earlier rather than wait until billions have been stolen. Also, CMS should take the lead and root out fraud and present the findings to the media, not waiting for the New York Times to identify skin substitute fraud or CBS News to identify California hospice fraud (or a blogger in Minnesota to identify numerous forms of Medicaid fraud).
Read more at: Ferraris and Shell Companies: Five Charged in Medicare Fraud Schemes