This is all bad information.
What you have is a yeast infection. It is causing tiny cuts. When the tiny cuts heal, they are less elastic than skin. That is why you are having trouble retracting when you are erect.
I don't know if there's any truth to this or not, but a doctor can tell you pretty quickly if you have a "yeast" infection. He or she can often tell just by looking, but to be sure they may take a small skin scraping (it doesn't hurt) and look at it under a microscope.
If it is a yeast/fungal infection, my guess is that the doctor will prescribe clotrimazole with bethamethasone. Clotrimazole is an effective anti-fungal medication (you can buy it over-the-counter), and as I previously described, the betamethasone will reduce any inflammation/irritation and will speed healing. However, the doctor may not prescribe it enough to thin the skin, because he or she may consider it unnecessary.