A Band-Aid® on a huge Medicare fraud

The Biden administration moved last November to end one of the largest Medicare ripoffs in the program's history. The Trump regime is scaling that back.

One of the largest Medicare fraud schemes in program history began to unravel several years ago when accountable care organizations created under the Affordable Care Act began noticing most of their savings, which they share with taxpayers, were vanishing due to the exorbitant cost of a single product — wound care bandages made mostly from dried placenta cells.

By April 2024, the National Association of Accountable Care Organizations (NAACOS) had enough data to notify the Centers for Medicare and Medicaid Services (CMS) about the outlandish sums being paid to physicians using “skin substitute” bandages for wound care instead of traditional bandages. The physicians, who purchased the skin substitutes at a steep discount from manufacturers, were billing ACOs at the list price and pocketing the difference.

Some patients were racking up millions of dollars for the skin substitutes used to cover their diabetic sores and other hard-to-heal wounds. According to a letter NAACOS sent to a Medicare payment contractor in June 2024, “the skin substitutes have been provided to patients who are poor candidates for specialty wound care, including hospice patients receiving significant wound care in the last three days of life, patients with inability to off-load pressure or transport without force, and patients who are unable to maintain adequate nutrition.”

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This lucrative scheme for physicians was providing even larger profits for their manufacturers, almost all of which are privately-owned. Using loopholes in the law, they began charging an average of more than $6,000 per square inch for skin substitute bandages. Some products reaching over $21,000, according to a New York Times investigation in April.

Five years ago, the highest priced skin substitute bandages on the market was only $1,045 per square inch. Medicare spending on skin substitute bandages soared from about $250 million in 2019 to more than $10 billion in 2024, according to CMS.

The Biden rule

After NAACOS alerted CMS to the alleged fraud, the Biden administration began crafting a new rule that would sharply lower the maximum price paid the firms selling the expensive bandages. It also limited payments to physicians who used skin substitute bandages purchased from firms that had generated medical evidence showing they improved wound care better than much cheaper standard bandages. Many firms in the field produce no such studies since the bandages do not require FDA approval beyond meeting sterility standards. The rule was slated to go into effect this past February.

That when the Trump regime sprang into action. The rule was delayed until April 13 as part of its blanket regulatory freeze. Then, in March, Trump issued a post on his Truth Social site claiming: “‘Crooked Joe’ rammed through a policy that would create more suffering and death for diabetic patients on Medicare” — an echo of the industry’s false claims.

How did Trump know anything about an issue that at that point still had not appeared on the mainstream media’s radar screen? Last fall, when the Biden rule was in the works, San Antonio-based Extremity Care, one of the largest firms in the skin substitute field, donated $2 million to MAGA Inc., the super PAC supporting Trump’s election campaign. In February, according to post this week by journalist Judd Legum on the substack Popular Information, Extremity Care donated another $5 million to MAGA Inc.

In April, the day after publication of the Times exposé, Dr. Mehmet Oz's CMS postponed enactment of the new rule until 2026. This allowed companies to continue selling at high prices for at least another eight months.

Then, three weeks ago, the Trump regime reversed field and included a price limit for skin substitutes in the physician payment rule for 2026. The proposal sets a maximum price of $806 per square inch. “We’re making it easier for seniors to access preventive services, incentivizing health care providers to deliver real results and cracking down on abuse that drives up costs,” Oz said in a statement.

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However, nothing the Trump regime says should be taken at face value. As Legum reported, the new rule does not limit limit coverage to products that are scientifically proven to be effective. Moreover, the $806 price is higher than what many reputable firms in the industry charge.

The two biggest abusers of the loopholes in the law are based in Texas: Extreme Care and Ft. Worth-based Legacy Medical Products. Both are privately held and neither has tested their products against traditional bandages to determine if they generate superior outcomes.

And they’re not done fighting. They’ve formed the Mass Coalition to fight the new rule. They’ve also paid $320,000 a year to Brian Ballard, a Trump fundraiser who is widely regarded as the lobbyist with the most influence with the Trump administration, according to Legum. Susie Wiles, who is Trump's Chief of Staff, worked for Ballard. Many of the early commenters on the proposed rule are using identical cut-and-paste letters to protest the proposal, the kind of ginned up outrage that inside-the-Beltway lobbyists are expert at generating.

ACO-employed clinicians are worried that even this limited rule will be deep-sixed by the transactional Trump regime. In its July story announcing the rule’s reintroduction, the Times quoted Alex Binder, the vice president of the Parker Advanced Care Institute, a nonprofit medical practice belong to an ACO that treats older patients with chronic or terminal illnesses in New Jersey.

“There has been pushback in the past,” Binder said. “Will there be pushback again?”