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The rules say that plans must pay for a medical service or item if regular Medicare would pay for it in this case. You can find this rule at 42 Code of Federal Regulations (CFR) Section 422.101.

The rules say that Chronic Wounds are defined as wounds that do not respond to standard wound treatment for at least a 30 day period during organized comprehensive conservative therapy. 

For all wounds, documentation (as outlined in the documentation requirements of the policy) and a comprehensive treatment plan, before initiation of a specialized wound therapy product is required. 

For purposes of this LCD a Failed Response is defined as an ulcer or skin deficit that has failed to respond to documented appropriate wound-care measures, has increased in size or depth, or has not changed in baseline size or depth and has no indication that improvement is likely (such as granulation, epithelialization or progress towards closing).

Medicare covers application of CTPS to Ulcers or Wounds with Failed Response that are:

Partial- or full-thickness ulcers, not involving tendon, muscle, joint capsule or exhibiting exposed bone or sinus tracts, with a clean granular base unless the CTP package label indicates the CTP is approved for use involving tendon, muscle, joint capsule or exhibiting exposed bone or sinus tracts, with a clean granular base ; 
Skin deficit at least 1.0 cm in size; 
Clean and free of necrotic debris or exudate; 
Have adequate circulation/oxygenation to support tissue growth/wound healing as evidenced by physical examination (e.g., Ankle-Brachial Index (ABI) of no less than 0.60, toe pressure > 30mm Hg); 
For diabetic foot ulcers, the patient's medical record reflects a diagnosis of Type 1 or Type 2 Diabetes and also reflects medical management for this condition.

Wound healing is impaired by the systemic use of tobacco. Therefore, ideally patients who have smoked will have ceased smoking or have refrained from systemic tobacco intake for at least 4 weeks during conservative wound care and prior to planned bioengineered skin replacement therapy.

Documentation (in the pre-service record) specifically addressing circumstances as to why the wound has failed to respond to standard wound care treatment of greater than 4 weeks and must reference specific interventions that have failed. Such record should include updated medication history, review of pertinent medical problems that may have occurred since the previous wound evaluation, and explanation of the planned skin replacement surgery with choice of CTP graft product.

The procedure risks and complications should also be reviewed and documented. Documentation of smoking cessation counseling and cessation measures prescribed, if applicable, must also be documented in the patient's record.

Application of a CTP graft for lower extremity chronic wound (DFU and VLU) will be covered when the following conditions are met for the individual patient:

Presence of neuropathic ulcers and diabetic foot ulcer(s) having failed to respond to documented conservative wound-care measures of greater than four weeks, during which the patient is compliant with recommendations, and without evidence of underlying osteomyelitis or nidus of infection. 
Presence of a venous stasis ulcer for at least 3 months but unresponsive to appropriate wound care for at least 30 days with documented compliance. 
Presence of a full thickness skin loss ulcer that is the result of abscess, injury or trauma that has failed to respond to appropriate control of infection, foreign body, tumor resection, or other disease process for a period of 4 weeks or longer.

In all wound management the ulcer must be free of infection and underlying osteomyelitis with documentation of the conditions that have been treated and resolved prior to the institution of CTP therapy. For purposes of this LCD, appropriate therapy includes, but is not limited to:
Control of edema, venous hypertension or lymphedema 
Control of any nidus of infection or colonization with bacterial or fungal elements 
Elimination of underlying cellulitis, osteomyelitis, foreign body, or malignant process 
Appropriate debridement of necrotic tissue or foreign body (exposed bone or tendon) 
For diabetic foot ulcers, appropriate non-weight bearing or off-loading pressure For venous stasis ulcers, compression therapy provided with documented diligent use of multilayer dressings, compression stockings of > 20mmHg pressure, or pneumatic compression 
Provision of wound environment to promote healing (protection from trauma and contaminants, elimination of inciting or aggravating processes)

Limitations: 

Due to the propensity for misuse of CTP products, reimbursement may be made only when the medical record clearly documents that these products have been used in a comprehensive, organized wound management program. All listed products, unless they are specifically FDA-labeled or cleared for use in the types of wounds being treated, will be considered not reasonable and necessary, therefore not eligible for reimbursement.

Partial thickness loss with the retention of epithelial appendages is not a candidate for grafting or replacement, as epithelium will repopulate the deficit from the appendages, negating the benefit of overgrafting 
CTP grafts will be allowed for the episode of wound care in compliance with FDA guidelines for the specific product (see utilization guidelines) not to exceed 10 applications or treatments. In situations where more than one specific product is used, it is expected that the number of applications or treatments will still not exceed 10 
Simultaneous use of more than one product for the episode of wound is not covered. Product change within the episode of wound is allowed, not to exceed the 10 application limit per wound per 12 week period of care. 
Treatment of any chronic skin wound will typically last no more than twelve (12) weeks. 
Repeat or alternative applications of skin substitute grafts are not considered medically reasonable and necessary when a previous full course of applications was unsuccessful. Unsuccessful treatment is defined as increase in size or depth of an ulcer or no change in baseline size or depth and no sign of improvement or indication that improvement is likely (such as granulation, epithelialization or progress towards closing) for a period of 4 weeks past start of therapy. 
Retreatment of healed ulcers, those showing greater than 75% size reduction and smaller than .5 sq.cm, is not considered medically reasonable and necessary.
Skin substitute grafts are contraindicated and are not considered reasonable and necessary in patients with inadequate control of underlying conditions or exacerbating factors (e.g., uncontrolled diabetes, active infection, and active Charcot arthropathy of the ulcer extremity, vasculitis or continued tobacco smoking without physician attempt to effect smoking cessation). 
CTP grafts are contraindicated in patients with known hypersensitivity to any component of the CTP graft (e.g., allergy to avian, bovine, porcine, equine products). 
Repeat use of surgical preparation services in conjunction with CTP application codes will be considered not reasonable and necessary. It is expected that each wound will require the use of appropriate wound preparation code at least once at initiation of care prior to placement of the CTP graft. 
Re-treatment within one (1) year of any given course of CTP treatment for a venous stasis ulcer or (diabetic) neuropathic foot ulcer is considered treatment failure and does not meet reasonable and necessary criteria for re-treatment of that ulcer with a CTP procedure.

You can find this information in Medicare's Local Coverage Determination (LCD): Wound Application of Cellular and/or Tissue Based Products (CTPs), Lower Extremities (L36690).

If you want to read these Medicare rules, you can go to this website www.medicareappeal.com.