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Contact Us Spring 2001; Volume 2, Number 1
Features: Health Care for the Elderly
Comprehensive Care for the Elderly: Is PACE the Answer?
Y.K. Gary Chu, O.D. and Jocelyn Pan, M.P.H.
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The U.S. population is aging. The elderly (persons over 65) currently represent 12.8% of the U.S. population, and this population is expected to double by the year 2030.1 Moreover, the older population within this group (85 years old and above) has a higher life expectancy than previous generations. As a result of these trends, more resources need to be allocated to care for the elderly, and the U.S. needs to examine ways to provide them with both high-quality and cost-effective health care.

Medicare Long-term Care: Current trends

Medicare, as it is currently financed, has been found to discourage the management and coordination of care. In its omission of prescription drug coverage and its favoring of acute care over interventions for functional status, medical costs are escalating uncontrollably for older adults and their families. Moreover, Medicare has not kept pace with medical advances, new care strategies, and accompanying coverage needs, including interventions for sensory impairment and psychiatric care. Optimal management of chronic illness requires close coordination with long-term care services, but today's financing policies encourage fragmentation and cost shifting.2

In addition, long-term services for older adults represent a substantial share of total healthcare spending in the US and an area of major concern for state policymakers. Nursing home and home health care accounted for almost 12% of personal health expenditures in 1995 and approximately 14% of all state and local health care spending. Importantly, neither private insurance nor Medicare cover long-term care to any significant extent, and few older adults have private long-term care insurance. The disabled elderly must rely on their own resources or, when these are depleted, turn to Medicaid or state-funded programs to pay for their long-term care. Because of the high cost of long-term care, Medicaid coverage for long-term care provides a safety net for the middle class as well as the poor. Medicaid long-term care expenditures for the elderly are projected to more than double in inflation-adjusted dollars between 1993 and 2018 - due to the aging of the population and to price increases in excess of general inflation.3

PACE Program: Beginnings

"PACE", the Program of All-inclusive Care for the Elderly, is a program that has recently been developed as an alternative to the long-term care services provided by traditional Medicare and Medicaid. PACE is a fully integrated managed care system that was pioneered in 1971 by On Lok Senior Health Services4 in San Francisco's Chinatown. Provision of care for the elderly at that time was found to be somewhat fragmented and disparately located. On Lok became the country's first adult day care offering an array of services that stress the entire well being of an individual. What started out in 1975 as an in-home support and primary care service caught the attention of the Health Care Financing Administration (HCFA). The unique involvement of an interdisciplinary team of health workers and social services became the model of long-term care provision that HFCA decided to test in the form of a demonstration project four years later. In 1983, On Lok obtained waivers from Medicare and Medicaid to test its new financing method for long-term care. The organization took full financial risk in providing a full scope of care for each member in exchange for a fixed capitated income from Medicare and Medicaid for each enrollee.5 This proved to be very successful: On Lok documented to HCFA that the cost of care for their members was 15% less than that for fee for service Medicare enrollees.

On Lok's success served as a model to HCFA for the provision and financing of health care for the elderly. As a result, in 1986, PACE was started as a demonstration project. A decade later, with the passage of the Balanced Budget Act of 1997, PACE became a permanent provider - under Medicare and a state option under Medicaid - of comprehensive medical and long-term care services to the frail elderly in need of nursing home care. In the past three years, states have become increasingly interested in offering PACE as an alternative to fee-for-service (FFS) long-term care. Therefore, the cost effectiveness of the program needs to be assessed in order to provide evidence for its long-term viability to potential sites. This paper will consider the PACE program's cost saving to date as well as its potential viability for long-term success.

PACE Program: Enrollee Profile

The PACE model has made a timely entrance in the provision of care for frail elderly and those in need of long-term care. The number of PACE sites has grown steadily since the first replication site started operation in 1990. As of December 1999, there are 25 PACE sites operating, reporting a combined census of 6045. An additional 8 sites are in an operational "pre-PACE" phase of development during which they are capitated for long-term care services and Medicare reimbursement is fee-for-service.

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PACE enrolls elderly who are certified for nursing home care with a minimum age of 55 years old. Enrollees are generally frail, have multiple medical problems (see table 1), and may have limited psychosocial and economic support. They represent a population at high risk for hospitalizations and nursing home placement. The goals of treatment for this fragile population are to stabilize chronic medical conditions and to optimize functional status. With attention to clinical monitoring, it is hoped that early detection and treatment can reduce morbidity and mortality and avoid long and costly hospital stays.

PACE Program: Features
Thumbnail of Table 2
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The program pools Medicare and Medicaid funds to provide a broad spectrum of acute and long-term care services for older patients through the use of interdisciplinary teams of health professionals. The PACE model includes in-home services, day care, laboratory and ambulance services, skilled nursing facility care, medical specialty services (see table 2), and restorative/supportive services. The integration of Medicare and Medicaid funds have allowed for flexibility in offering services not routinely covered by these plans.

In particular the monthly fixed payments per enrollee provide for:

  • physician visits
  • prescription drugs
  • rehabilitation services
  • personal care workers
  • hospitalization
  • nursing home care, if needed.

Other services not covered by Medicare or Medicaid include:

  • social services intervention
  • care management
  • respite care
  • extended home-care nursing
page 1 | page 2 | endnotes
Spring 2001, Volume 2, Number 1
Table of Contents
Editor's Note
Features: Medicare Symposium
Features: Interviews
Features: Health Care for the Elderly
Health Highlights
In Focus

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