Toward medicaid capitation of the program of all-inclusive care for the elderly [PACE] using grade-of-membership methods

Delivering long-term services and supports [LTSS] to the dually eligible (Medicaid and Medicare) aged and disabled population is an expensive proposition for Medicaid programs and the country. States have begun a massive "rebalancing" of LTSS to serve this population with less costly community-based instead of institutional (nursing home [NH]) care. Various Medicaid prepaid, managed LTSS plans for the aged/disabled population have emerged, beside an array of community-based LTSS paid on a fee-forservice [FFS] basis, or-increasingly-by organizations contracted by some states to manage larger groups of Medicaid or dually eligible clients. PACE is the oldest and most established of alternative and emerging managed LTSS models focusing specifically on aged and disabled certified at a nursing-home level of care, operating 88 programs in 29 states. Like other managed LTSS, PACE serves people whose impairments and disabilities (and thus care needs) are "intermediate" between those of aged/disabled clients typically served in community-based Medicaid 1915(c) waiver programs, and those in NHs. PACE is uniquely mandated to provide a broad array of community-, center-, and institutionally-based LTSS under its governing federal regulations. Thus, the costs of PACE to Medicaid are also expected to be "intermediate" between its average outlays for aged/disabled waiver clients and NH residents. Yet, while research consistently reports improved outcomes for PACE compared to alterative care, it has been difficult to establish PACE's value because the costs of the alternatives for its population are unknown due to misidentification of comparators. Nevertheless, by law, states opting for PACE must establish what Medicaid pays for care of a "PACE-comparable" population (its "upper-payment limit" [UPL]) that PACE capitation must not exceed. In this paper, we describe PACE and its relevant governing regulations; discuss how states presently establish UPLs and set PACE rates; demonstrate a method for determining a UPL for PACE in a PACE-eligible population; and discuss how this improved method might be used for rate setting.

Duke Scholars

Author Patrick J. Eric Stallard Social Science Research Institute