Medicare 2026 Skin Substitute Update: New Coverage & Billing

Medicare is rebooting its policies related to wound care as of January 1, 2026. On that date, the Centers for Medicare & Medicaid Services (CMS) will implement a different method of paying for skin grafts. The Medicare 2026 Skin Substitute Update will be an important change for clinics. As such, if you operate a wound care clinic you need to understand these rules immediately. Because of these changes, your claims will either be paid or denied.

What Is the Medicare 2026 Skin Substitute Update?

The Medicare 2026 Skin Substitute Update is a new federal policy that will alter how Medicare insures and pays for cellular and tissue-based products (CTPs). As of January 1, 2026, the seven Medicare Administrative Contractors (MACs) will apply a single set of rules for diabetic foot ulcers and venous leg ulcers. Medicare will insure only 18 products that were deemed to meet high evidence standards. All other products will be either not covered by Medicare, or will be subject to the discretion of your local MAC. Additionally, Medicare will establish a flat payment rate of $127.14 per square centimeter for the majority of grafts.

Why Medicare is Changing the Rules

There has been excessive spending on skin grafts. In 2019, Medicare spent $256 million on these products. However, by 2024 that figure rose above $10 billion. CMS states that this increase occurred because of the high launch prices and a lack of supporting data for many products.

Fraud and Waste Were Identified

The government identified instances of fraud and waste. The Fraud Defense Operations Center reported that it had prevented almost $185 million in improper payments in 2025. A medical group filed a claim for $4 million with respect to a single patient. However, that patient did not have a wound. The Medicare 2026 Skin Substitute Update establishes a flat rate in order to eliminate profit incentives.

The Three Categories of Product Coverage

Medicare evaluated evidence for 66 products. Based upon what the studies demonstrated, Medicare placed products into three categories. Here's how the categories are defined:

1. Group 1: The Covered List

Only 18 products qualified to be included on the "Covered" list. These products have considerable clinical data demonstrating their efficacy. Therefore, Medicare will only cover these products and will do so without further obstacles.

2. Group 2: The Discretionary List (154 Products)

Medicare has placed 154 products into the 12 month "status quo" category as they currently have active research projects underway and MACs may elect to reimburse for these products on an individual case by case basis provided it was proven to be medically necessary for the patient.

3. Group 3: The Non-Covered List (158 Products)

As of January 1, Medicare will no longer cover or reimburse for 158 products which were deemed to lack sufficient data to support coverage. As a result, if you bill for these products for treatment of chronic ulcers, you will receive a denial. Many of the amniotic membranes that previously had been popularly used will also be included in this list.

Human Medical Billing helps you identify what products are on the non-coverage list so that you can begin reducing your lost revenue. We offer the highest quality medical billing services to assist with these complicated lists.

New Final Payment Rate of $127.14

Prior to the implementation of this Medicare 2026 Skin Substitute Update, Medicare was paying for skin substitutes based on the amount the manufacturer had priced them. This allowed manufacturers to use "spread pricing," or charge for the actual graft portion of the cost in addition to making a profit from it.

CMS has now moved to an across-the-board, fixed rate, which is $127.14 per square centimeter, for the 2026 year. This rate will be applied equally to both physician office settings and hospital outpatient department settings. Furthermore, CMS has designated grafts as "incident to" supplies. This designation implies that the graft is considered one of the supplies used during the procedure.

Why does this matter? Physicians are no longer able to select the most costly graft based upon their own financial interests; they must select the product that is best suited to each individual patient while remaining within the boundaries of this established budget. Our medical coding services can assist your staff in learning how to properly bill these supplies under the new rate.

Rules for Medical Necessity

Medicare does not cover skin substitutes simply based on the application of one, but rather only after you meet certain clinical criteria. So let’s take it apart.

Four-Week Trial Period

Before utilizing a skin substitute, you are required to attempt conventional treatment for at least four weeks, which involves cleaning the wound and removing pressure from the foot. Specifically for patients suffering from a venous ulcer, they must wear a compression wrap of at least 20mmHg.

The 50% Rule

At the end of this trial period, the wound has failed to improve by at least 50%. Therefore, if a wound is healing well with common bandaging, Medicare will not pay for a graft.

Vascular Checks

In addition to meeting the above criteria, a vascular assessment of the patient's blood flow is required. In cases involving a diabetic foot ulcer, an Ankle-Brachial Index of at least 0.60 is needed, as well as toe pressures greater than 30 mmHg. Additionally, the physician responsible for managing the patient's diabetes or venous disease must be documented in your notes.

Documenting these notes can be time-consuming and overwhelming; our denial management services assure that your documentation includes each of the noted elements prior to submission of your claims. We help you stay ahead of these requirements.

Major Coding and Modifier Changes

The Medicare 2026 Skin Substitute Update has deleted old skin substitute codes. The CMS will be removing HCPCS codes C5271 through C5278. These were the low cost skin substitutes provided by hospitals. Now all facilities must use CPT codes 15271 through 15278 for the application.

You also need to use the right modifiers:

• JW Modifier: Use this to report any part of the graft you threw away.
• JZ Modifier: Use this to show that you used the whole graft with zero waste.
• KX Modifier: Use this if you need more than four applications.

Medicare will allow no more than eight skin substitutes to be applied within a 12 to 16 week time frame. Once the fourth skin substitute has been applied, the provider must document the continued healing of the wound as well as the continued requirement for additional skin substitutes.

Our medical coding services help keep your facility's staff informed of the most current modifiers, as incorrect modifiers can lead to audits. In addition, our medical credentialing services assist in ensuring your providers are properly enrolled to bill these codes.

Fraud Enforcement is Growing

Although there may be a flat fee, the federal government will still be monitoring this area of business. The DOJ has established a Health Care Fraud Strike Force in Massachusetts to focus on skin substitute related fraud. The DOJ is concerned with the potential for over utilization of grafts. Over utilization occurs when a provider utilizes a graft that is too large or when a provider applies excessive number of grafts as compared to what is required.

In 2025, the DOJ conducted a major takedown and charged seven individuals in relation to a $1.1 billion fraud scheme. To ensure safety, it is important to have well-documented (perfect) paperwork. If you are concerned regarding the compliance of your practice, our medical accounts receivable services are available to assist by reviewing your historical claim submissions to identify any high risk areas and/or patterns that may lead to an audit.

Next steps for your practice:

• Check your inventory. Stop ordering products on the non-covered list.
• Update your record system. Make sure your notes track the 50% reduction rule.
• Train your team. Ensure everyone knows the new $127.14 rate and coding changes.

How Human Medical Billing Can Help

Handling these changes alone is risky. Human medical billing offers expert healthcare revenue cycle management services to keep your clinic profitable. From AI medical billing that spots errors before they happen to expert oversight, we have the tools you need.

Our medical billing service identifies errors before they occur and provides the expert oversight needed. Our company has knowledge of the Medicare 2026 Skin Substitute Update (CMS) and all other updates made by CMS. Read our success stories to see how we helped several wound care centers weather the storm as each center was impacted when there were policy changes. For additional information regarding our mission, visit our about us page. If you have questions regarding common billing obstacles, check our FAQs.

If you would like to know how our services work, we will walk you through the process. For further tips regarding wound care, read the Xpert billing blog. We are here to help you succeed with the data you need to grow your business.

Do not allow these new regulations to slow you down. Protect your revenue now. In 2026, Medicare is trying to cut back by $19.6 billion. Do not let this expense come from your clinic's budget. Stay focused on the 18 covered products and document your patients treatment thoroughly. Time is moving quickly toward the new year. Prepare for the transition.

Contact Human Medical Billing to schedule a compliance readiness review or learn more about our end-to-end billing and regulatory support services.