Medicare Clarifies: Skin Substitute Wastage Is Not Reimbursable Beginning in 2026

• Discarded Skin Substitutes Will Not Be Paid. Medicare does not reimburse for any unused or discarded portions of non-BLA skin substitutes, regardless of package size or clinical necessity. 
• JW and JZ Modifiers Do Not Apply. The JW and JZ modifiers are limited to drugs and biologicals payable under Medicare Part B and must not be used for skin substitutes billed as incident-to supplies. 
• Only the Applied Portion Is Billable. Providers may bill Medicare only for the units actually administered to the patient; discarded units must be absorbed by the provider, making waste reduction and product selection more important than ever. 

CMS has finalized important Medicare billing changes that directly impact how skin substitutes are reimbursed. Beginning January 1, 2026, non-BLA skin substitutes are classified as incident-to supplies, and Medicare will only pay for the portion of the product that is applied to the patient. Any discarded or unused skin substitute material is not payable under any circumstance. 

CMS has clarified, through Question 9 of the Discarded Drugs and Biologicals – JW and JZ Modifier Policy FAQs, that the JW and JZ modifiers do not apply to incident-to supplies, including certain skin substitutes, and that discarded portions of these products are not payable by Medicare.¹ This distinction is critical for healthcare practitioners who routinely furnish skin substitutes in both facility and non-facility settings. 

Historically, the JW and JZ modifiers have been used to report discarded amounts of drugs and biologicals that are separately payable under Medicare Part B when supplied in single-dose containers. However, CMS emphasizes in Q9 that these modifiers are only applicable to drugs and biologicals, not to incident-to supplies—even if those supplies are billed separately. Importantly, Medicare does not provide payment for discarded amounts of incident-to supplies under any circumstances.¹

Beginning January 1, 2026, CMS finalized a significant policy shift affecting non-BLA skin substitutes (i.e., skin substitute products not marketed under a biologics license application). Under the CY 2026 Physician Fee Schedule and OPPS/ASC final rules, these non-BLA skin substitutes are no longer treated as drugs or biologicals payable under Medicare Part B. Instead, they are paid as incident-to supplies, with reimbursement limited strictly to the portion of the product that is actually administered to the patient.¹

As a result of this reclassification, practitioners may no longer bill Medicare for any discarded or unused portion of a non-BLA skin substitute. If the entire product is used, no modifier is required. If only part of the product is applied and the remainder is discarded, only the administered units may be billed, and the discarded amount must be absorbed by the provider. CMS explicitly states that it is not appropriate to bill discarded units with the JW modifier, nor may those discarded units be included in the billed administered amount.¹

This policy has important operational and financial implications. Providers must adjust purchasing, preparation, and application practices to minimize waste, as discarded skin substitute material will no longer be reimbursed. Accurate documentation of the administered amount remains essential, but documentation of wastage does not create a pathway to payment. 

In summary, CMS’s guidance in Q9 reinforces a clear principle: Medicare will not pay for skin substitute wastage when those products are classified as incident-to supplies. Providers should ensure billing practices align with this policy to avoid denials, audits, and financial losses. 

1. Centers for Medicare & Medicaid Services. Discarded drugs and biologicals—JW modifier and JZ modifier policy: frequently asked questions. Updated December 22, 2025. Centers for Medicare & Medicaid Services. Accessed January 6, 2026.