Effect of PACE on Costs, Nursing Home Admissions, and Mortality: 2006-2011. EXECUTIVE SUMMARY


The primary goal of this study is to determine whether the previous findings of cost neutrality for Medicare expenditures and of higher Medicaid expenditures (relative to fee-for-service [FFS]) under the Program of All-Inclusive Care for the Elderly (PACE), is still the case, and if not, how it has changed. We focus on more recent cohorts of PACE enrollees to capture the effects of changes in capitation payments, especially in Medicare payments to PACE plans, on Medicare and Medicaid expenditures. Along with program effects on costs, we also examine effects on the use of nursing home (NH) services and mortality. Results are compared across states with enough observations to support state-specific analysis.

Data and Methods

We use data on dually eligible beneficiaries newly enrolled in PACE during 2006-2008 in eight states who are followed until 2011 along with data on two different matched comparison groups comprised of--(1) new enrollees in Medicaid home and community-based services (HCBS) 1915(c) waiver programs and new entrants to NHs in the same states; and (2) new enrollees in HCBS waiver programs alone--who are followed over an identical time period. We included eight states in this study that had a sufficient number of PACE enrollees during 2006-2008 and also had participants in the HCBS 1915(c) waiver program during the same years. We used a nearest neighbor matching algorithm based on propensity score estimation to select the two comparison groups--implemented separately for each of the eight states, with pre-enrollment demographics, chronic conditions, and service utilization and costs included as covariates in the model.

We use Medicare and Medicaid enrollment and claims data from a variety of sources for: (1) identifying PACE and HCBS enrollees, and new NH entrants; (2) imposing our sample selection criteria; (3) matching; and (4) constructing variables for the outcomes analysis. The specific data sources or files we used include Medicare Advantage and Prescription Drug data, Medicaid Analytic eXtracts, Master Beneficiary Summary File, Medicare Standard Analytic Files, and the Minimum Dataset Timeline File. We examine per beneficiary per month Medicare expenditures, Medicaid expenditures, and total expenditures over successive six-month intervals from the month of sample entry for PACE and matched comparison group enrollees. Specifically, we compare actual expenditures (Medicare and Medicaid capitation payments) for PACE enrollees in each six-month interval to predicted values for the FFS expenditures that the PACE enrollees would have incurred had they not enrolled in PACE, using a regression model estimated on the matched comparison group to obtain the prediction. We examine the cumulative mortality rates for PACE and both matched comparison groups (HCBS enrollees and NH entrants, or HCBS enrollees alone) over successive six-month intervals from sample entry using a separate logistic regression for each interval. We also compare PACE and matched HCBS waiver enrollees on any use of NH services, proportion of days in a NH, likelihood of being in a NH for at least 30 days, likelihood of being in a NH for at least 90 days, and the cumulative risk of being in a NH for at least 90 days over successive six-month intervals from sample entry, using either logistic or linear regressions. We repeated the analysis of NH utilization using the matched comparison group comprised of both NH entrants and HCBS waiver enrollees although NH utilization was expected to be significantly high in the matched comparison group, since it included NH entrants.


Across all eight states, actual capitated monthly Medicare expenditures for PACE enrollees during successive six-month intervals were mostly similar to the predicted expenditures that the enrollees would have incurred had they been in FFS Medicare. Actual Medicaid expenditures on PACE enrollees, however, significantly exceeded predicted expenditures in all intervals, with the magnitude of the difference remaining stable over time. These main findings were robust to alternative sample definitions, such as the exclusion of New York (the largest study state) from the sample, and the exclusion of PACE enrollees with prior HCBS enrollment or NH use and of matched HCBS enrollees with prior NH use. To address concerns about the possibility of the results being driven by New York (the study state with the largest sample size), we examined findings after excluding New York from the study. This led to similar findings for Medicare expenditures but a slightly different pattern of findings for Medicaid expenditures--the significant positive gap in Medicaid spending was much higher, once New York was excluded. New York had actual Medicaid expenditures under PACE that were significantly lower than projected FFS expenditures, but actual Medicare expenditures tended to be significantly higher than the projected counterfactual costs, with the combined effect being that total capitated expenditures for PACE enrollees were lower or similar to predicted FFS expenditures. The Medicaid expenditure findings for New York are, therefore, quite different from those in earlier studies, and from those for the other seven states in this study, including California and Massachusetts. One possible explanation for these different findings for New York is higher FFS payment rates for the comparison group of matched NH entrants and HCBS waiver enrollees in New York compared to FFS payment rates in other states. The Medicaid spending under PACE in California was significantly higher-than-predicted expenditures, with the difference growing over time--mainly due to Medicaid capitation payments increasing at a faster rate than the projected FFS costs. In Massachusetts, the capitated Medicaid payments were significantly higher than the projected FFS costs in spite of the fact that the capitation payments declined over time, because predicted expenditures also declined. However, the discrepancy decreased to statistically insignificant levels over time.

Using a matched comparison group comprised of HCBS waiver enrollees alone, results were broadly similar, but the estimated gap in expenditures, with higher actual payments under PACE, was larger, especially for Medicaid payments. This difference is as expected, since Medicaid costs predicted from a comparison group comprised solely of HCBS enrollees are lower than those for a comparison group comprised of a mix of new NH entrants and new HCBS recipients.

Throughout the followup period, PACE enrollees had a lower mortality rate than enrollees in the matched comparison group comprised of HCBS waiver enrollees and NH entrants, with the difference being large and significant in each period and ranging from eight to 17 percentage points during each six month followup period after the first year through month 60 after enrollment. Comparing PACE to matched HCBS waiver enrollees alone, PACE enrollees still had significantly lower mortality, but by a smaller magnitude of 5-6 percentage points after the first year through month 48 after enrollment. However, the mortality findings could be affected by unobserved differences in health and functional status between the groups and need to be interpreted with caution.

For the NH utilization outcomes, our primary analysis compared PACE enrollees against a matched comparison group comprised of HCBS waiver enrollees alone. PACE enrollees were more likely to use a NH in each of the seven intervals, with the difference being statistically significant during the first four intervals. Proportion of days in the NH was similar for PACE and matched HCBS waiver enrollees, as was the likelihood of being in a NH for at least 30 days. PACE enrollees were significantly less likely to be in a NH for at least 90 days compared to matched waiver enrollees in five of the seven intervals, although the cumulative rates of being in a NH for at least 90 days were similar across PACE and matched HCBS enrollees across intervals. The NH results were robust to the exclusion of New York from the study sample. Compared to the matched comparison group comprised of both NH entrants and HCBS waiver enrollees, PACE enrollees, expectedly, had significantly lower utilization of NH services with large, negative differences on all NH utilization outcomes.


While our main findings on Medicare and Medicaid expenditures are in line with results from prior studies meeting standards for a rigorous nonexperimental evaluation, we find important new evidence in both the trend and the variation across states. We find, like previous studies, that PACE capitation rates are essentially equivalent to what enrollees would have cost Medicare had they been in FFS (except during the first six months after enrollment, when Medicare costs under PACE are significantly lower), but for Medicaid, the capitated costs are significantly higher than what that program would likely have paid under FFS. However, prior studies found that the gap in Medicaid spending decreased over time, while we find that the Medicaid spending gap was fairly stable in the pooled analysis across all eight states using the matched comparison group of both HCBS and NH entrants. However, the Medicaid spending gap was higher and did decrease over time, using a matched comparison group of HCBS enrollees only--in line with findings from prior studies meeting standards for a rigorous evaluation. More importantly, the findings for New York and California are in stark contrast to each other and to those from earlier studies and point towards success in controlling Medicaid expenditures on PACE enrollees in New York, but increasing overpayments in California. However, the findings are not all favorable for New York, since capitated Medicare expenditures under PACE in New York are significantly higher than expected FFS expenditures in several intervals, unlike in California and Massachusetts where the Medicare cost differences were mostly negative or insignificant.

Our results for mortality and NH use suggest that PACE enrollees have greater longevity and lower likelihood of suffering a long (and possibly permanent) NH stay. Our finding of substantially lower mortality under PACE corroborates similar findings in several earlier studies, regardless of whether enrollees are compared to a matched sample comprised solely of new HCBS waiver enrollees or of a combination of new waiver enrollees and new NH entrants. However, it is unclear whether the favorable findings for mortality can strictly be interpreted as an effect of PACE rather than unobserved differences across the three groups. For instance, terminally ill patients may be less likely to enroll in PACE, leading to lower mortality for PACE enrollees. Also, the inclusion of NH entrants--who are likely to be sicker--in the first matched comparison group together with imperfect risk adjustment due to absence of baseline data on health and functional status immediately preceding enrollment could further bias the mortality findings in favor of PACE. The findings for NH utilization are interesting and require thorough examination, in that PACE enrollees were found to have a significantly higher likelihood of being in a NH during the followup period, but their proportion of days in the NH was similar to that for the matched HCBS waiver enrollees for most of the followup period, as was their likelihood of being in a NH for at least 30 days. However, PACE enrollees were significantly less likely to experience a nursing facility stay of at least 90 days compared to their matched HCBS waiver counterparts in a particular interval, although the cumulative rates of being in a NH for at least 90 days were similar across PACE and matched HCBS enrollees across all intervals. Taken together, these findings suggest that: (1) additional PACE enrollees experienced long-term NH stays in each successive interval, while there was greater overlap across intervals among HCBS enrollees who experience long-term NH stays, and for longer time periods in each interval than PACE enrollees; and (2) PACE may be using NHs in lieu of hospital admissions in some cases, or to shorten hospital stays, but enables enrollees to avoid long NH stays or institutionalization, in general. The potential to substitute nursing facility stays for hospital stays is much greater for PACE than for FFS, because PACE enrollees are not required to have a three-day hospital stay in order to qualify for Medicare coverage of a nursing facility stay.

While the findings either corroborate or extend earlier studies of PACE, having to rely exclusively on secondary data does create some limitations. Future research can expand the scope of the current study to include survey-based (or assessment) measures of beneficiary characteristics, such as physical and cognitive functioning, examine additional survey-based outcomes on quality of life, and use a longer followup for Medicaid expenditures with additional years of Medicaid data. It would also be important to look at acute care utilization outcomes, such as hospitalizations and emergency department visits.

View full report


"PACEeffect.pdf" (pdf, 1.12Mb)

Note: Documents in PDF format require the Adobe Acrobat Reader®. If you experience problems with PDF documents, please download the latest version of the Reader®