Why PACE programs are expanding as in-home nursing demand grows

A little-known program to keep low-income seniors out of nursing homes is getting a shot in the arm. 

After years of sluggish growth, the 33-year-old Program of All-Inclusive Care for the Elderly is on a growth spurt as states look for ways to provide more home- and community-based care to aging populations. PACE, a Centers for Medicare and Medicaid Services’ program, is offered in 32 states to approximately 62,000 participants. In the past year, Kentucky, Missouri and Washington, D.C., added programs, with Illinois planning to launch five programs next year. 

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Here’s what you need to know about PACE.

What is PACE?

The Program of All-Inclusive Care for the Elderly provides in-home support and a variety of services in PACE-owned neighborhood centers for mostly dual-eligible Medicare-Medicaid participants who qualify for skilled nursing, but are able to remain in their homes. PACE programs are operated by some for-profit companies such as Menlo Park, California-based WelbeHealth and Denver, Colorado-based InnovAge. Most, though are operated by nonprofits, such as the ArchDiocese of New York.

PACE provides home care, prescription drugs, meals and transportation to participants. Enrollees can also go to neighborhood PACE facilities for adult day services, medical care, dental care, laboratory services, recreation and other services. Some programs also offer behavioral health services and palliative care.

How does PACE work?

PACE organizations receive capitated payments, a predictable, upfront and set fee, from Medicare and Medicaid to cover costs for each participant. For PACE, states calculate what the fee-for-service expense would be for participants if they were in nursing homes and then pay PACE providers a discount of approximately 14% per enrollee. 

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Does PACE save money?

A 2021 report by the Department of Health and Human Services found preventable hospitalizations were 44% lower for dual-eligible PACE enrollees than dual-eligible Medicaid patients in nursing homes and 60% lower than enrollees in home- and community-based waiver programs. The National PACE Association said potential savings vary by state. A 2022 study by the Bipartisan Policy Center estimated South Carolina saved $9,000 annually for each program participant. Wyoming saved an estimated $12,300 annually per participant.

Why has PACE been slow to expand?

Start-up costs are high. Operators must be able to demonstrate to the Centers for Medicare and Medicaid Services, as well as states, that they have enough capital to build a center and cover potential operating losses for the first few years as the program ramps up. “Anyone who opens a PACE center needs to have between $10 and $20 million on your balance sheet,” said Dr. Vaneesh Soni, Welbehealth’s chief growth officer.

Why has interest in PACE been growing?

The COVID-19 pandemic and funding from the American Rescue Plan Act ignited interest in PACE. An estimated 400 nursing homes have closed since 2020 which is prompting states to look for options other than skilled nursing facilities for aging populations, according to National PACE Association President Shawn Bloom. State, territorial and tribal governments received $350 billion in COVID relief funds, as well as a 10% increase in the federal medical assistance percentage to support home- and community-based services. Some states are using the funds to begin a PACE program or expand existing efforts. 

Could PACE be offered to a larger audience?

Medicare beneficiaries can buy into the program but it is expensive. They must buy a PACE Part D plan costing nearly $1,000 a month to cover the program’s generous prescription drug benefit. Those seniors must also foot the cost for services provided under Medicaid which can add up to $2,000 a month. 

A bipartisan team of senators introduced the PACE Part D Choice Act in mid-May which would let Medicare-only seniors with chronic conditions access the program by purchasing a standalone Part D drug plan costing approximately $45 a month. Bloom said his organization has also had discussions with CMS about ways to make the program more affordable to Medicare-only seniors. One idea would let those beneficiaries buy a more limited number of services offered under PACE.

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