Medicare Overhauls Advanced Wound Care Payments, Adds 20% Coinsurance for Skin Substitute Products Starting 2026

The Advanced Wound Care and Regenerative Medicine Access and Reform Act is a major shake-up for how Medicare pays for advanced wound treatments, specifically “skin substitute products.” Starting January 1, 2026, these products—which are cellular, tissue, or synthetic materials applied to chronic wounds—will officially become a covered benefit under Medicare Part B (SEC. 2).

This might sound like a simple win for access, but the bill completely changes the payment game. Instead of relying on the current Average Sales Price (ASP) system, Medicare will switch to a fixed payment structure. For 2026, this fixed price will be based on the volume-weighted average of 2023 billing data. The good news is that these critical products gain formal coverage and the payment rate will be the same across all outpatient settings, which should help standardize access whether you get treatment at a doctor's office or a hospital clinic (SEC. 3). The catch? Medicare patients will now be responsible for a mandatory 20 percent coinsurance on the new, fixed payment amount (SEC. 2).

The Price of Progress: Patient Coinsurance and Cost

For the millions of Medicare beneficiaries dealing with diabetic foot ulcers or other chronic wounds, this bill formalizes access to cutting-edge treatment. However, that 20% coinsurance is a real-world cost increase. If a treatment that Medicare previously covered under a bundled payment now costs, say, $1,000 under the new fixed rate, the patient is on the hook for $200 out-of-pocket, per application. For someone managing a chronic condition that requires multiple applications over several months, those costs can add up quickly, creating a serious financial barrier to the very treatments the bill is trying to promote.

The Scrutiny Squad: Targeting High-Volume Providers

One of the most significant parts of this legislation is the aggressive push for program integrity (SEC. 4). The Secretary of Health and Human Services is required to identify “outlier providers”—the top 3 percent of providers receiving the highest total Medicare payments for skin substitutes—every two years. If your clinic or hospital is in that top 3%, get ready for some serious administrative headaches.

These outlier providers will be immediately subjected to prepayment review of their claims starting in March 2026. Then, by January 2027, they face mandatory prior authorization for these products. This means more paperwork, more delays, and more administrative costs for the providers who treat the most complex wounds. The bill even sets a brutal trigger: if an outlier provider has a claim denial rate exceeding 75% for six consecutive months, the Secretary must determine that an abuse of billing privileges exists, which could lead to their exclusion from all federal health care programs (SEC. 4).

This is a double-edged sword. On one hand, it targets bad actors who may be wasting expensive products or billing excessively. On the other, it could unfairly penalize legitimate specialty centers that treat a high volume of complex patients. For a high-volume wound care center, a few administrative errors or initial coverage disputes could push them over that 75% denial cliff, risking their entire practice.

Cutting the Waste: The 120% Rule

To curb waste, the bill introduces a strict payment rule: Medicare will only pay for the “reasonable and necessary portion” of the skin substitute product used, not for any wasted product (SEC. 4). The bill defines this payment portion as the greater of 3 square centimeters or 120 percent of the size of the treated wound.

If a provider opens a large, expensive product but only uses a small piece, Medicare won't pay for the unused portion. While this sounds fiscally responsible, the fixed 120% rule might not account for the realities of treating irregular or complex wounds, potentially forcing providers to absorb the cost of necessary product waste or, worse, impacting patient care by limiting the size of the product used.

Clearing the FDA Bottleneck

Finally, the bill takes a look at the regulatory side of regenerative medicine (SEC. 5). It mandates that the FDA conduct a comprehensive review of its approval process for certain human cellular and tissue-based products. The goal is to streamline requirements, potentially creating a tiered review framework based on risk, and exploring the use of real-world evidence instead of duplicative clinical trials. This is a big deal for manufacturers and innovators, as it could accelerate getting new, advanced regenerative therapies to market, provided the FDA can find ways to streamline without compromising the required safety and efficacy standards.