PACE 101: Understanding the Medicare/Medicaid Program

The PACE Medicare/Medicaid Program has quickly become one of the most celebrated health plan models supported by our government. For those who are not familiar, the Program of All-Inclusive Care for the Elderly (PACE) is a fully integrated, provider-based health plan offering comprehensive care to the most frail and costly elderly member population. The PACE philosophy believes weakened individuals are better served in the community when they can live at home rather than in a nursing facility. Currently, 95% of PACE members reside outside the nursing home setting and are experiencing better health outcomes at a lower spend.

A Breakdown of the PACE Program

To qualify, enrollees must be over 55 years of age, live in a PACE service area, and obtain certification by the state for the need of nursing level care. It’s worth noting that PACE members are also oftentimes dual eligible for Medicare and Medicaid as well.

The PACE model is unique because it combines funding through Medicare, Medicaid, and private payers to sponsor an interdisciplinary team of health professionals. This all-embracing group delivers the entire continuum of medical and long-term care services. The end-to-end arrangement is comprised of:

  • Physicians
  • Nurses
  • Home health aides
  • Physical and occupational therapists
  • and social workers

Additionally, members receive

  • Transportation
  • Meals
  • Dentistry
  • Eye care
  • Hearing aids
  • and more

The reimbursement model is risk adjusted, similar to Medicare Advantage, with each PACE plan receiving a capitated payment to provide care for these members.

Slow but Meaningful Market Growth

Currently, 144 PACE programs operate 272 PACE centers, serving approximately 58,000 members. Though PACE has existed for over 30 years now, 20 states are still without a plan and 11 feature only a single plan.

While the numbers are growing and there is evidence that the model is working, enrollment remains low. A recent New York Times article cites a cumbersome enrollment process, a lack of support for expansion by state legislators, and limitations on brand awareness as limiting factors on PACE’s overall growth.

Key PACE Takeaways and Risk Adjustment Opportunities

For existing PACE plans, there is an opportunity to further improve performance on premium accuracy by assessing current risk adjustment operations and designing improvement strategies.

Plans should focus on driving completeness of clinical data captured, and reporting to CMS is just as critical for PACE plans as it is for traditional Medicare Advantage organizations.

From our recent work with PACE plans, we have identified some key takeaways:

1. PACE is a win-win arrangement

Seniors value the freedom to live in their own homes and are healthier because of it. Since the COVID-19 pandemic surfaced, coronavirus cases and deaths are one-third lower for PACE program participants than nursing home residents. The healthcare ecosystem benefits as PACE programs support early detections of disease, help reduce the frequency of ER visits, and reduce hospitalizations.

2. PACE members have an extremely high Risk Adjustment Factor (RAF)

The latest PDAC report from CMS predicts a 2.565 average total risk score for PACE in July 2022. The inverse relationship of low plan membership to high overall RAF leaves little margin for error in risk adjustment activities. Applying prospective strategies to inform complete condition capture is critical for plans to achieve optimal RAF accuracy.

3. The current CMS-HCC risk adjustment payment model is not optimized for PACE plans

When CMS updated the V22 model for calculating capitation payments to V24 for Medicare Advantage, they excluded PACE. This is significant because V24 includes conditions highly prevalent to the PACE patient population, including dementia, pressure ulcers, and CKD (chronic kidney disease).

Additionally, the V24 model introduced thePayment Condition Count (PCC) multiplier, where more HCCs yield a higher PCC coefficient. Since PACE patients are likely to have more HCCs than a Medicare Advantage member, the PCC from V24 produces a sizeable additive factor. In a recent analysis, we recalculated the V22 value for one of our PACE plan clients using the V24 model and found a 6.6% RAF improvement for ~700 members.

Succeeding in PACE

Our teams at Pareto Intelligence and GHG Advisors share a passion for the overall success of the PACE Medicare/Medicaid Program and its mission to afford frail seniors a higher quality of life in their later years. Our group of market-leading advisors has the knowledge and expertise to evaluate current PACE programs, identify opportunities, and improve RAF accuracy.

Our team of advisors consist of seasoned veterans who have served at every decision-making level of leading health plans. We’re dedicated to helping organizations grow, perform, and transform through professional consultancy and technology-based solutions. Reach out to learn more.

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