For the last decade, the Bipartisan Policy Center’s Health Program has advanced federal policy reforms to improve chronic and long-term care for individuals with complex needs. This work began with four of BPC’s health leaders—former Senate Majority Leaders Tom Daschle and Bill Frist, former Health and Human Services Secretary and Gov. Tommy Thompson, and former Congressional Budget Office Director Alice Rivlin. BPC has since released reports that include a range of bipartisan, federal policy solutions to improve access to long-term services and supports (LTSS); simplify and streamline authorities for Medicaid home and community-based services (HCBS); and better integrate care for individuals dually eligible for Medicare and Medicaid.
Building on those efforts, BPC seeks to improve access to and enrollment in Programs of All-Inclusive Care for the Elderly (PACE). PACE is a fully integrated, comprehensive care model available to qualifying beneficiaries through Medicare, Medicaid, and private payments (by individuals without Medicare or Medicaid.) The provider-led, home and community-based care model generally centers on an adult day care center and is available to frail, older adults (ages 55 years and older).
Access to community-based, high-value, fully integrated care models such as PACE is increasingly important as the U.S. population ages rapidly and demand for LTSS grows. Improving the spread and scale of PACE would help address expected, growing demand for LTSS by providing eligible, older adults with access to comprehensive care in their homes and communities.
Through interviews with key stakeholders and a private roundtable discussion, BPC identified several challenges to the growth of PACE that policymakers and the Centers for Medicare & Medicaid Services (CMS) should address through legislative, regulatory, and policy reforms. These challenges include reducing administrative barriers to the submission and review of applications for new PACE programs and service area expansions (SAEs); high Part D premiums that make PACE unaffordable for Medicare beneficiaries who are ineligible for Medicaid; limits on eligibility that make PACE unavailable to certain high-need, high-cost (HNHC) populations who are likely to benefit from the model; strict federal rules around marketing PACE programs; lack of clear, easily accessible consumer information on PACE; quality and encounter data that do not adequately capture the full range of services delivered by PACE models and the value of PACE; and inadequate resources at the state and federal levels to support the appropriate growth of PACE.
This report contains new federal policy recommendations that would address the challenges to the spread and scale of PACE. As described in the Policy Landscape section below, both political parties have introduced legislation that aims to make PACE more affordable and accessible to current and new populations. Throughout this report, BPC describes how our recommendations align with or differ from any proposed legislation.
The PACE model originated from the deinstitutionalization movement of the 1950s and federal policy changes in the 1970s that began shifting the delivery of LTSS from institutional to home and community-based settings. In the early 1980s, On Lok Senior Health Services (On Lok) in San Francisco developed a home and community-based care model that integrated primary, acute, and long-term care services under a Medicaid demonstration waiver. This model became known as the PACE model.
The Robert Wood Johnson Foundation made the growth of the model possible by providing funding to On Lok to examine the feasibility of replicating the model across states. Following this effort, in 1986, Congress authorized waivers for 10 replication sites. The Robert Wood Johnson Foundation further supported expansion of the model by authorizing start-up grants for replication sites and a grant to On Lok to provide technical assistance. By 1992, 10 replication sites were operating.
These initiatives paved the way for federal legislation that codified the PACE model into law. Through bipartisan efforts, Congress passed the PACE Coverage Act of 1997 as part of the Balanced Budget Act of 1997 (BBA), which established PACE as a permanent Medicare program and as a state option in Medicaid.
Today, 148 PACE programs operate 273 centers across 32 states and serve about 62,000 people. The vast majority (90%) of PACE participants are dually eligible beneficiaries, while 9% are enrolled only in Medicaid, and 1% are enrolled only in Medicare or pay privately. PACE currently serves a relatively small number of participants compared with other models serving dually eligible beneficiaries, such as dual eligible special needs plans (D-SNPs), but PACE is unique in that Medicare and Medicaid financing and services are fully integrated under this provider-led model.
PACE programs can fully integrate financing and services through their capitated financing structure. PACE organizations receive risk-adjusted, per member per month payments to take on full financial risk for the total cost of participants’ care. This financing structure allows the programs significant flexibility in care delivery while aiming to incentivize high-value care and innovation.
Total federal spending on PACE includes Medicaid and Medicare spending on the program. In fiscal year 2021, federal and state Medicaid spending on PACE services totaled $2.9 billion. Of that amount, the federal share of the costs was about $1.8 billion, while the state share was about $1.1 billion (from the 31 states with PACE programs at the time.) BPC could not find publicly available data on Medicare spending on PACE, or the total cost of the PACE model to the federal government.
PACE programs must have an interdisciplinary care team that manages and provides participants’ care. The comprehensive care model covers all Medicare and Medicaid services, including LTSS. PACE also covers any other service that the interdisciplinary care team determines is medically necessary.
PACE is thus well designed to cost-effectively address the needs of populations with high rates of chronic illness, including the dually eligible population. In fact, a 2021 report from the Office of the Assistant Secretary for Planning and Evaluation (ASPE) at the U.S. Department of Health and Human Services (HHS) found that full-benefit dually eligible beneficiaries enrolled in PACE are significantly less likely to be hospitalized, to utilize emergency department care, or to be institutionalized than Medicare Advantage (MA) enrollees. The rate at which PACE participants experience potentially preventable hospitalizations is also substantially lower than similar populations: 44% lower than the rate for dually eligible Medicaid nursing home residents, and 60% lower than the rate for dually eligible HCBS waiver enrollees. Several studies across more than 20 years of medical data demonstrate this association between PACE enrollment and reduced hospitalization.
As described in detail below, some data suggest that PACE could produce cost savings. In South Carolina, Oklahoma, Wyoming, and some other states, PACE led to cost savings serving beneficiaries, compared with providing care under a Medicaid waiver or in a nursing home. South Carolina saved almost $9,000 per PACE participant per year, while Wyoming saved an estimated $12,361 per participant annually. Oklahoma, meanwhile, saved around $1.2 million total per year.
The value of this fully integrated and capitated model became particularly apparent during the COVID-19 pandemic. The high rates of coronavirus infection and mortality associated with congregate care settings, such as nursing homes, accelerated the shift toward delivering LTSS in home and community-based settings. As a home and community-based care model with unique flexibilities, PACE sites were able to respond quickly to the pandemic, and many programs adapted by delivering care creatively in the home. For example, PACE programs increased their reliance on technology for telehealth, home monitoring, combating social isolation, and other activities. They also repurposed transportation vehicles to deliver meals, groceries, medications, durable medical equipment, and other items such as brain games for cognitive stimulation.
Policymakers, advocates, and stakeholders have made important strides in establishing and growing PACE. However, the need to develop and promote policies that better help frail, older adults live as independently as possible has become clearer, particularly during the pandemic as well as the public’s preference and policymakers’ desire for accessible alternatives to institutional care. As such, members of Congress should consider policy reforms that will substantially increase access to and enrollment in PACE, and improve care for individuals with chronic illness, including many dually eligible beneficiaries. The reforms would also address expected demand for LTSS among the rapidly aging U.S. population. Accordingly, this report includes legislative and administrative federal policy solutions to:
- Expand the capacity and geographic reach of PACE;
- Increase PACE enrollment;
- Raise consumer awareness of PACE; and
- Ensure and demonstrate the continued value of PACE.
BPC estimates that the federal costs associated with the policy recommendations in this report would include a one-time cost of $38 million and an annual cost of $12 million (see Appendix). Estimated costs could be slightly offset over the long term through potential savings from reduced hospitalizations, emergency department use, and institutional care. BPC also estimates that under one of BPC’s policy recommendations, Medicare-only PACE participants could experience potential savings of roughly more than $11,000 per year in premium payments. Please see the full report for additional details.
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