Major Policy Initiatives

PACE Modernization Act

While demand for PACE has been growing, outdated payment and regulatory systems have prevented the program from reaching its full potential. Payments for PACE providers are tied to costs incurred in the state’s fee-for-service Medi-Cal program, which is rapidly shrinking due to the growing use of managed-care plans to deliver services for beneficiaries. Disparities in rates and questions about the adequacy of the rates have plagued the program for years. The program operates under a complicated network of federal and state requirements that necessitate lengthy approval processes for both new and expanded programs.

Recognizing this, CalPACE advocated for the Brown administration to introduce legislation as part of its 2016-17 budget proposal in January to revamp the PACE reimbursement structure and create additional regulatory flexibility for the program. Under the legislation, payments would be based on the actual costs of serving beneficiaries with a goal of providing more accurate and fair payments and aligning the payment methodology more closely with the methods the state uses to pay managed-care plans.

The legislation also requires the state to seek greater regulatory flexibility for PACE from the federal Centers for Medicare and Medicaid Services for operational aspects of PACE. These include the make-up and operation of PACE interdisciplinary care teams, the programs’ ability to contract for services with community-based physicians and other senior service providers, and the ability to market PACE services.

Assuming the new rate methodology is approved by the federal government, a current cap on the number of PACE organizations that can operate in the state would be lifted and, for the first time, for-profit organizations would be allowed operate PACE programs, bringing state law into conformity with recent federal regulatory changes. Both provisions are expected to increase the number of programs as well as the geographic areas served by PACE.

In response to requests from PACE organizations, the final legislation requires the new payment methodology to take into account the unique features of PACE, including its use of dedicated care centers to deliver and coordinate care. In addition, the legislation contains provisions to ensure the payment methodology accounts for high-cost conditions, such as Hepatitis C, recognizes the higher costs of start-up programs, and mitigates financial impacts on PACE programs during the transition to the new rate methodology.

In conjunction with the legislation, the state has committed to further streamlining the application process for new and expanding programs, including the use of a new electronic application process and providing concurrent review of applications by the state and federal governments, which is expected to speed up the review of applications.