One Ongoing Scam Cost Medicare $15 Billion

The popular quotation (incorrectly attributed to Thomas Jefferson) that eternal vigilance is the price of liberty and freedom could equally apply to the fight against waste, fraud, and abuse in government programs. Whenever lawmakers pass new measures to prevent waste, or law enforcement cracks down on fraud, scammers tend to migrate to some new scheme.

On that front, a report recently issued by the House Energy and Commerce Committee summarizing activities in recent months provides a mixed perspective. In some respects, changing policies and greater enforcement have protected individuals and taxpayers. But the fact that committee members introduced 14 anti-fraud measures in conjunction with the report’s release shows that Washington still has more work to do.

Skin Substitute Spending Plummets

The Energy and Commerce report highlighted one point of good news that has emerged in recent months. As a result of reforms put into place by the Trump administration, Medicare spending on skin substitutes has plummeted.

“Skin substitutes” are a category of wound-care products such as biologic, synthetic, or tissue-engineered materials applied to chronic, non-healing wounds. As I had previously reported, this specific category of substitutes has a history of enormous waste and fraud thanks to a Medicare policy that put no cap on what providers could charge for newly introduced skin substitute products in their first six months on the market. Thus, the category experienced a more than 60-fold increase in spending during the Biden years, from $256 million in 2021 to an estimated $15.4 billion in 2025.

Medical providers were introducing “new” — and of course more expensive — skin substitutes every six months, because the providers could charge whatever they wanted for the product’s first half-year and Medicare would pay it. Physicians, who could buy the products at a discounted price and charge Medicare the full rate, were placing as much as $14 million in “skin substitutes” on a single patient to get in on the action.

Beginning this year, the Centers for Medicare and Medicaid Services (CMS) changed its payment policies such that providers could no longer charge unlimited amounts for skin substitutes. And in June, the annual Medicare trustees report compiled by program actuaries noted that due to the “significant policy changes to skin substitute payments starting in 2026 … spending for skin substitutes will decline by more than 90 percent in 2026.” A recent video by CMS Administrator Mehmet Oz noted that this difference in spending alone has moderated Medicare Part B premiums by $11 per month, or $132 per year. The difference amounts to real savings for America’s seniors — not to mention American taxpayers.

Not Classifying Provider Risk

On the other hand, the Energy and Commerce report also highlights ways where states continue to fall short in fighting fraud. After sending inquiries to several states about their Medicaid program integrity efforts, the committee received back some disturbing responses. For instance, states are not properly classifying providers’ risk levels, in violation of federal regulations.

Risk classification serves not just as a common anti-fraud tool, but also as a common-sense one: governments should focus their efforts on those categories of providers with the biggest program integrity concerns. For instance, high-risk categories of providers require criminal background checks and fingerprinting, in addition to verifying the provider’s medical licensure and similar steps.

Yet states like New York did not even bother to classify risk for several categories of provider that serve only Medicaid and not Medicare patients. (States can piggyback off of CMS’s Medicare provider classifications, but by definition they cannot do so for services that only Medicaid and not Medicare provide.) Those Medicaid-only services include some of those most at-risk for waste, fraud, and abuse, including in-home personal care services and applied behavior analysis for patients with autism.

As the saying goes, you can’t manage it if you don’t measure it. States that aren’t even classifying their providers by risk level — as they are required to do — demonstrate a cavalier attitude toward protecting scarce taxpayer funds, not to mention beneficiaries themselves.

Fighting fraud requires persistence and a willingness to adapt and respond to criminals’ own changes in tactics and strategies. Victory in the struggle will never come via a battlefield surrender or a “Mission Accomplished” moment. Instead, it will arrive through myriad small, incremental changes that over time change the culture within government programs, awaken and educate the public, and simultaneously dissuade criminals. Here’s hoping that program integrity continues to take more steps forward than back.