Perspective: Five Short Lines Position PACE for Broad Expansion

A tremendously positive legislative achievement occurred on November 5, 2015, when the PACE Innovation Act (P.L. 114-85) was signed into law. Although it has received little notice, what this five-line statute does is provide the Centers for Medicare & Medicaid Services (CMS) with the authority to loosen the rigidity of the best, most established service delivery model for a geriatric population wishing to “age in place” at home: the Program of All-Inclusive Care for the Elderly. Some of the most salient possibilities for evolution of the PACE model are wrapped up in a potential PACE Expansion.

PACE already has a solid reputation as a comprehensive program tailored to dually eligible beneficiaries who need a mix of medical care and long-term services and supports (LTSS). Yet it has a small footprint across the country, serving about 35,000 adults age 55 and older. With the additional flexibility provided by the new law, PACE is now in the ambit of CMS’ Center for Medicare & Medicaid Innovation (CMMI). For the first time, the program can be readily adapted and tweaked to serve Medicare-only beneficiaries who have a need for some LTSS but are not yet functionally at the nursing home level of care (which varies between states) and have incomes above their state’s Medicaid financial eligibility threshold. During the height of the Baby Boomer-driven “age wave” a little more than a decade from now, when tens of millions of seniors living into their 80s and beyond will be seeking reliable, affordable assistance to remain in their homes, many might welcome a flexible, comprehensive program that offers both ongoing medical care and tailored LTSS.

Here is how an adapted PACE model might work: Medicare-only beneficiaries would be empowered to buy into PACE for their LTSS services with private dollars, whether in the form of tiered bundles of services, on a menu-driven basis, or a combination of both approaches. These at-risk beneficiaries would be appropriately motivated and incentivized to buy just the amount of LTSS that they actually require, which would be determined based on a comprehensive assessment and a corresponding comprehensive care plan. The amount they would pay would be far less than what has long been required for Medicare-only PACE enrollees, who, by regulation, are now forced to pay the full Medicaid capitation rate. Because the Medicaid capitation rate is a blended rate to cover the needs of those who are eligible for nursing homes and to stay with them to the end of their lives, the fee is typically several thousand dollars a month. Vanishingly few Medicare-only elders think that they will need this level of service, so there are very few Medicare-only PACE enrollees today. If, instead, Medicare beneficiaries could secure tailored LTSS at much more reasonable premiums, this would stretch and conserve their retirement savings. From the vantage point of states that are struggling to plan for substantially larger Medicaid LTSS populations, this could have a positive impact on slowing spend-down rates.

In addition, it may be possible to consider whether the out-of-pocket payments made in such an arrangement could be made through a revised, more affordable private long-term care insurance (LTCI) market. Some initial promising ideas for improving LTCI have recently been announced by the Bipartisan Policy Center.

More importantly in the near term, the overall state of readiness of the Aging Network (AN), which is still not well-understood within the health care industry, must be enhanced. For an expanded PACE program or any other health care provider to succeed in serving a significantly larger population of Medicare beneficiaries with varying needs for LTSS, which are delivered in the home, will require much more focused attention to the AN by policymakers and stakeholders in the health care sector. Composed of thousands of small, locally administered Area Agencies on Aging (AAAs) and related community-based organizations across the country, the AN is charged with arranging for and providing social services and supports (e.g., home-delivered nutrition services, respite care and flexible, adapted transportation systems) to all older citizens who are deemed to be in need in any given community. In practice, the ability of the AN to deliver on this promise is compromised by an inadequate financing base. Although the AN is moving as quickly as possible to transition to partnering with health care partners, some of the key infrastructure required (e.g., data systems to collect, report, and analyze performance metrics that are compatible with what health care providers are asked to submit) is poorly developed. This suggests that more focused attention, as well as well-targeted financial investments, must be made in order to create a reliable, comprehensive, cost-effective service system that spans the health and social services sectors.

To date, investments by the health care agencies in the federal government to link the AN’s service delivery system with the health care system have been miniscule. Along with chronic underfunding through the appropriations process despite steadily rising need among aging seniors in communities across the country, underinvestment in the AN’s infrastructure is arguably stymieing further development of this sector. Questions about how an expanded PACE program (and similar evolving initiatives) can be positioned to work with the AN most cost-effectively are probably best answered through prudent investments in research, pilots, and demonstrations, along with ongoing monitoring and quality improvement efforts. Without such investments, LTSS services for millions of community-dwelling Medicare beneficiaries could become increasingly unreliable or perhaps even completely unavailable. If this happens, the likely outcome will be that health care costs for a rapidly growing population of older adults who need LTSS services but cannot secure them will continue to rise quickly.

On the other hand, an expanded PACE model approach offers the possibility of connecting an already established, high-quality, interdisciplinary health care model with an existing, though still loosely organized, community-anchored social services sector. It is a possible and exciting adaptation of the best that our current care system has to offer. To make it a reality will require timely, concerted action on the part of CMS and interested stakeholders. Also needed are local leaders and community and aging services advocates who recognize that there is an opportunity at hand to create a strong foundation for a more comprehensive system of care—one that explicitly includes supports that address the social determinants of health.

Click here to view a slide deck on the Frail Elder Expanded PACE Program.