Reforming Medicare Payment for Skin Substitutes — Ripping Off the Bandage

Abstract

In January 2026, the Centers for Medicare and Medicaid Services (CMS) implemented a major overhaul of Medicare reimbursement for skin substitutes in an effort to curb runaway spending. Between 2019-2024, annual Medicare Part B spending on these products increased more than 40-fold, from $250 million to >$10 billion. Prior to the recent reform, CMS reimbursed clinicians for skin substitutes administered in non-facility settings (e.g., physician offices and patient homes) at rate of average sales price +6% at the average sales price (ASP) plus 6%. However, skin substitute manufacturers were. ally omitted from federal ASP reporting requirements. Some manufacturers and clinicians exploited this exemption to enter spread pricing arrangements, whereby clinicians profited on substantial differences between Medicare reimbursement (calculated based on undiscounted list prices) and actual acquisition costs. The newly implemented payment policy eliminates the potential for spread pricing by setting a flat, site-neutral payment rate. In 2027, CMS intends to establish a 3-tiered payment system for skin substitute products based on US Food and Drug Administration regulatory classification. While these reforms represent a critical step forward, additional measures—such as bundled reimbursement, expanded prior authorization, and evidence-based coverage policies—may be necessary to ensure sustainable and effective wound care.