PACE and the medicare plus choice risk-adjusted payment model

This paper investigates the impact of the Medicare principal inpatient diag nostic cost group (PIP-DCG) payment model on the Program of All-Inclusive C al e for the Elderly (PACE). Currently, more than 6,000 Medicare beneficiar ies who are nursing home certifiable receive care from PACE, a program pois ed for expansion under the Balanced Budget Act of 1997. Overall, our analys is suggests that the application of the PIP-DCG model to the PACE program w ould reduce Medicare payments to PACE, on average, by 38%. The PIP-DCG paym ent model bases its risk adjustment on inpatient diagnoses and does not cap ture adequately the risk of caring for a population with functional impairm ents.