PACE and the Medicare+Choice risk-adjusted payment model

Area of Science:

• Health Economics
• Geriatric Care
• Healthcare Policy

Background:

• The Program of All-Inclusive Care for the Elderly (PACE) serves over 6,000 Medicare beneficiaries needing nursing home care.
• PACE is positioned for expansion under the Balanced Budget Act of 1997.
• Current Medicare payment models may not accurately reflect the costs of PACE's comprehensive care for functionally impaired seniors.

Purpose of the Study:

• To evaluate the financial impact of applying the Medicare principal inpatient diagnostic cost group (PIP-DCG) payment model to the PACE program.
• To assess the adequacy of the PIP-DCG model's risk adjustment for the PACE population.

Main Methods:

• Analysis of the application of the PIP-DCG payment model to PACE program data.
• Risk adjustment evaluation based on inpatient diagnoses versus functional impairments.

Main Results:

• The PIP-DCG model is projected to reduce Medicare payments to PACE by an average of 38%.
• The PIP-DCG model's reliance on inpatient diagnoses does not sufficiently account for the complex health needs and functional impairments of PACE participants.

Conclusions:

• Implementing the PIP-DCG model for PACE could lead to significant underfunding.
• A payment model tailored to the unique needs of PACE participants, including functional status, is necessary for accurate risk adjustment and financial sustainability.