Here’s what PACE is all about

PACE is a fully integrated, non-profit, managed care system pioneered in the early 1970s as a day program at On Lok Senior Health Services in San Francisco’s Chinatown. The program later added home care and transportation services and, in 1979, the program recruited a physician staff.

People enrolled in PACE must be a minimum of 55 years of age and eligible for nursing home care. On average, enrollees are:

• 80 years old;
• dependent in 2.9 activities of daily living;
• 8.1 medical diagnoses;
• suffer from mental disorders such as dementia and depression:
• incontinent.

The program grew in the 1980s, expanding through a partnership with Medicare and Medicaid. On Lok received fixed monthly payments for each enrollee, as a way to test a new financing method for long-term care. On Lok delivered all care for the enrollees, including hospitalization.

Then in 1986, the Robert Wood Johnson Foundation in Princeton, NJ, and John A. Hartford Foundation in New York City gave major grants to replicate On Lok’s program, which then was named PACE. Six sites were chosen, and each PACE demonstration site received Medicare and Medicaid waivers to operate under a capitation financing agreement for three years.

The number of PACE sites grew last year to 14 operating under dual Medicare and Medicaid capitation. About 20 more sites were capitated for long-term care services and paid on a fee-for-service basis by Medicare.

The Balanced Budget Act gave PACE permission to grow to 40 sites in 1998, and the program could add another 20 each year thereafter. Plus, the act permits up to 10 for-profit demonstration sites.

PACE successfully lowered the cost of caring for frail elderly people who are near the end of their lives. For example, PACE enrollees’ rate of hospital use in 1995 averaged 2,399 hospital days per 1,000 persons per year. This compared to Medicare’s average utilization rate of 2,448 days per 1,000 persons per year in 1994.1,2

Medicaid capitation payments to PACE give states anywhere from 5% to 15% savings over fee-for-service costs for a comparable nursing home certified population, according to the National PACE Association in San Francisco.


1. Reuben DB, Eng C, Pedulla J, et al. Models of Geriatrics Practice. Program of all-inclusive care for the elderly (PACE): An innovative model of integrated geriatric care and financing. J Am Geriatr Soc 1997; 45(2):223-232.

2. U.S. Department of Health and Human Services. 1995 HCFA Statistics. HCFA Publ. No. 03373. Washington, DC: Government Printing Office; 1995.