Bandages made from dried placentas

It’s true! Tissue banks pay hospitals to collect placentas and ship them to laboratories where they’re made into paper-thin “skin substitutes” to cover stubborn wounds. Such bandages may help certain types of wounds to heal, but often they’re not needed. That’s because they’re moneymakers. One square inch of skin substitutes costs $5,948 on average. Medicare pays for them. What’s more, because the government categorizes them like donated organs, the manufacturers don’t have to prove that the bandages work.  

More than 100 new skin substitute products have come to market since 2023, and their prices have ballooned. Medicare will reimburse any price that a company sets for brand-new skin substitutes, even if it is far above the market average. Some companies offer doctors a “bulk discount” of up to 45 percent. Taking advantage of the discount, some doctors then collect a Medicare reimbursement for the full price of the product, pocketing the difference. The higher the price, the larger the doctors’ cut.

Here’s how it works: For the first six months of a new product’s life, Medicare will set the reimbursement rate at whatever price a company chooses. After that, Medicare adjusts the reimbursement to reflect the actual price paid by doctors after any discounts. To circumvent the price drop, some companies simply roll out new products. Example: In April 2023, Medicare began reimbursing $6,497 for every square inch of a bandage called Zenith, sold by Legacy Medical Consultants. After six months, the reimbursement fell to $2,746, after which Legacy introduced a new “dual layer” bandage called Impax, reimbursed by Medicare for $6,490.

Private insurance companies rarely pay for skin substitutes, but Medicare routinely covers them. Spending on skin substitutes exceeded $10 billion in 2024. In fact, Medicare now spends more on the bandages than on ambulance rides, anesthesia, or CT scans. For one patient in Nevada, Medicare spent $14 million on skin substitutes over the course of a year.

The Trump administration announced that it would delay a Biden-era plan to restrict Medicare’s coverage of skin substitutes, saying that it was reviewing its policies until at least 2026. It turns out that President Trump’s super PAC had received a $2 million donation from a leading bandage seller. I guess DOGE isn’t looking at that.

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