Context:

The Trump administration announced plans to limit Medicare spending on expensive skin substitutes, reversing previous delays of Biden-era rules aimed at reducing costs. This decision comes after Medicare spent over $10 billion on these bandages, which have limited evidence of efficacy and have been subject to pricing abuse by doctors and manufacturers. The new policy proposes a flat payment of $806 per square inch, significantly lower than current rates that can exceed $21,000 per square inch. While some doctors and organizations welcome the change, industry groups warn that the proposed payment rate could make it financially unviable for companies to continue producing these bandages. The rule is part of broader efforts to curb Medicare waste and includes measures like testing prior authorization processes in select states and prosecuting doctors involved in fraudulent billing practices.

Dive Deeper:

• Medicare plans to reduce payments for skin substitutes, a type of bandage made from dried placenta, which has cost the government billions with little evidence of effectiveness. The administration previously delayed implementing Biden-era cost-cutting measures but now seeks to enforce a flat payment rate.

• Spending on skin substitutes has surged by forty times in the last five years, reaching over $10 billion in 2024, making it one of the most significant examples of wasteful spending in Medicare's history. This increase is attributed to lax pricing regulations allowing manufacturers to set exorbitant prices.

• The proposed payment rate of $806 per square inch aims to dismantle a lucrative scheme where doctors purchase bandages at discounts and bill Medicare at full price, profiting from the difference. This practice has led some doctors to earn millions for simple procedures.

• Healthcare providers, particularly those in accountable care organizations, have been vocal about the overuse of skin substitutes due to its impact on their financial incentives from Medicare. These organizations support the proposed spending limits as a step towards reducing unnecessary expenses.

• Industry groups like the MASS Coalition argue that the new payment rate could prevent companies from covering production costs, potentially affecting the availability of these treatments for patients. The administration has delayed similar rule changes in the past, raising concerns about future pushback or alterations to the proposal.

• Additional measures include a prior authorization test in six states requiring doctors to justify the medical necessity of skin substitutes before billing Medicare. The Department of Justice is also prosecuting doctors for fraudulent billing, including two podiatrists accused of charging $90 million for unnecessary bandages.

• The proposed changes are part of a broader effort by the Trump administration to address Medicare inefficiencies and encourage healthcare providers to focus on preventive services and genuine patient outcomes, rather than exploiting financial loopholes.