PACE can show us the way.

Let's face it; we have a healthcare delivery and financing system for America's elderly that appears largely incompatible with their healthcare needs. It's a delivery system more oriented toward the acute care requirements of younger populations, and a financing system focused on facility-based care (which America's seniors would prefer to avoid). What's more, the funding programs reflect two very different philosophies of public support--one oriented toward a social insurance concept, in which all elderly are eligible, and one toward the concept of means testing and benefiting only the impoverished.

These multiple difficulties resulted not from conscious design, but from the unintended consequences of programs whose authors were not at all conversant with the particular healthcare needs of America's elderly. Their solution, therefore, will require that we focus precisely on those needs.

A number of programs have been developed and tested over the past 30 years to better structure the financing and delivery of care, particularly long-term care, for America's seniors. Most of these have focused on the need to better coordinate and integrate the services provided. They've done so through one of two basic, but very dissimilar, approaches: case management (the "brokerage" model) or direct provision of services (the "consolidated" model). Brokerage approaches have had only limited success, one reason being the difficulty of identifying high-risk patients for whom home- and community-based services would be most cost-effective, another being these programs' failure to integrate funding sources. Consolidated models, such as Evercare, Social Health Maintenance Organizations (S/HMOs), and Programs of All-inclusive Care for the Elderly (PACE), have done a better job of targeting recipients and integrating funding, and their results have been more promising. But they, too, have their limitations and challenges.

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Evercare, for example, is a nursing home-based approach to care integration that manages acute care financing and care delivery for residents. It is appropriately focused on case management and the use of geriatric specialists and has resulted in a significant decline in hospital admissions. But since its clientele already resides in nursing facilities and the program assumes no responsibility for custodial care, the program is limited in terms of its applicability and is not likely to be a significant solution to the overall problems of long-term care delivery and financing.

S/HMOs don't have that flaw. They were established in 1982 as part of a demonstration to bring both service providers and funding streams (Medicare and Medicaid) together. Unlike Evercare, their services are not oriented toward the institutionalized recipient of care. Indeed, their problem is the converse; in setting a limit on annual expenditures for its clientele, the S/HMO cannot cover the typical long-term stay in a nursing facility and, therefore, effectively denies the benefit. It is true that S/HMOs (as incorporated in the Medicare+Choice program in the Balanced Budget Act of 1997) have shown dramatic reductions in admissions to nursing facilities (by as much as 29% compared with non-S/HMO programs). But their financial limitations make them, like Evercare, unlikely solutions to long-term care financing.

So, let's look at PACE. In PACE (as is also true of S/HMOs), the concept of integrating the services needed by the client into a comprehensive package of care is facilitated by capitating payments to the programs (i.e., a fixed amount per member per month). PACE is clearly more advanced than S/HMOs, in that by focusing on seniors eligible for both Medicare and Medicaid, it receives a single, combined capitated payment from both programs. The dysfunctional compartmentalization of the elderly occasioned by separate funding streams (and separate management of that funding) is not a problem for PACE-eligibles. This integration of financing gives PACE the flexibility to provide services that are needed, not just those eligible to be reimbursed.

The PACE program's focus on interdisciplinary assessment, care planning, and intervention (delivering services deemed necessary for the client, not just those enumerated by obscure regulations) has resulted in even more dramatic reductions in nursing facility admissions than even those experienced by S/HMOs. While PACE clients become so only when certified by the state as being already nursing home-eligible, there are PACE programs with actual admissions to facilities as low as 5 to 10% of their enrollees. Indeed, the program's successes led Congress in 1997 to establish PACE as a permanent provider type under Medicare, with authorization for establishing 60 such programs across the country.

Yet even PACE has its problems--problems that, despite its documented successes, have kept it from becoming the major player it might yet become in the long-term care arena. Enrollees in most of the 20-plus PACE programs number only in the hundreds each. One of the smallest PACE programs, associated with my university (Johns Hopkins), has fewer than 150 members. (And, frankly, I'm not sure I could sleep nights were I managing a capitated program in which the risks of potentially high-cost enrollees had to be spread over such a small number of "covered lives"; all it takes is a few long-stay admissions to a nursing facility, at an average annual cost of more than $60,000, to demolish your business plan and court financial disaster.)

Small numbers of enrollees are only one of the four major problems the PACE program faces; failure to address any one of which might lead the program to be relegated to the status of "boutique long-term care." The program has experienced, for example, difficulties in recruiting primary care physicians. Appropriately trained and motivated physicians are indispensable to PACE. While certification in geriatrics is not a requirement for physician involvement in PACE, an understanding of the principles of geriatric care is.

It's certainly no secret that there just aren't enough geriatrics-oriented physicians. The Association of Directors of Geriatric Academic Programs (ADGAP) recently put some stark numbers on the table: The 7,500 trained geriatricians in practice today constitute barely one-half of those needed. And given the geometric growth in America's elderly population, the 14,000 we need today will balloon to 36,000 25 years from now. Worse yet, the number of geriatricians actually in practice is actually diminishing--dramatically so. ADGAP estimates that 2,730 fewer certified geriatricians are practicing today than in 1998, a more than 26% decline.

It gets even worse--we don't have sufficient numbers of academicians necessary to train those few medical students who might have an interest in the field. We need 2,400 of these teachers--we have 900. Also, while the Institute of Medicine suggests that each medical school should have at least nine geriatricians on its teaching staff, ADGAP estimates that only 30% of all schools meet that criterion. Only 27 of the more than 100 non-pediatric residency and fellowship training programs in our medical schools even have a curriculum requirement in geriatric care. (We won't even discuss departments of geriatric medicine--at last count, only six existed in the entire country.)

The third major challenge facing PACE is developmental. Bringing a PACE site up to speed takes time and money. Programs have routinely consumed from three to five years in the development phase, with about $1,500,000 in capital expenditures laid out before enrolling the first client. Because of these financial exigencies, one PACE challenge will be to partner with other providers, with the development phase consisting of repositioning existing facilities rather than creating them from scratch.

Finally, the PACE financing structure might well forever limit it to the status of a "welfare program." Is it permanently doomed to be available only to "dual eligibles" (those Americans on Medicare so poor as to qualify for Medicaid, as well)? Well, statutorily it's not--any Medicare recipient can join PACE, rich or poor. But someone has to pay what Medicaid doesn't. The Medicaid contribution has been typically looked upon as a form of PACE copayment. If Medicaid is precluded from paying because of the resources and/or income available to the beneficiary, then it is the beneficiary who's left holding the bag for private pay--typically close to $2,500 a month. Yes, $2,500 per month is pretty cheap compared with nursing homes rates, which can be twice that. But potential PACE clients aren't living in a nursing home. And when they look at the services that might be available to them at home for that additional money, they just might not find it to be worth it.

Nevertheless, for all these potential problems, programs such as PACE might well carry the seeds of a solution to the current inadequacies of long-term care financing and delivery. PACE has created cohesion where there was fragmentation. PACE has created awareness where there was confusion. PACE has created access where there were barriers. PACE has shown the value of a coordinated, interdisciplinary approach to providing services to patients whose needs are diverse--it has shown, for example, the value of holistic medicine, the hallmark of geriatric care. And it has changed the focus of both funding and delivery toward the recipient of service and away from the service provider.

Moreover, PACE exhibits high levels of customer satisfaction, marked by low rates of disenrollment. PACE has reduced both nursing facility and hospital utilization, with a hospital length of stay of 4.9 days, compared with the Medicare average of 7.6. And it has reduced the average of 7.6 medications per resident in the typical nursing facility to 5.5 for the PACE population.

So, is PACE the solution? Maybe so, maybe not--but certainly, the concepts incorporated in the PACE program are key to those solutions. Perhaps the greatest lesson to be learned from PACE is this: Treat the client as the focus--indeed, treat the entire client as the focus. Withstand the urge to force the recipient of care into categories comfortable for the practitioner, the bureaucrat, and the financier to deal with. Make the patient more the object than the subject of our attention; i.e., make meeting his or her needs, not ours, the ultimate goal of our endeavors.

Do that, and we just might have a system that works.

To send your comments to Dr. Willging and the editors, e-mail [e-mail].

Paul R. Willging, PhD, was involved in long-term care policy development at the highest levels for more than 20 years. For 16 years as president/CEO of the American Health Care Association, Dr. Willging went on to co-found the successful Johns Hopkins Seniors Housing and Care postgraduate program (cosponsored by the National Investment Center for the Seniors Housing & Care Industries), and later served as president/CEO of the Assisted Living Federation of America. He has enjoyed an equally long-lived reputation for offering outspoken, often provocative views on long-term care.