DEPARTMENT OF HEALTH & HUMAN SERVICES 
Health Care Financing Administration  
 Center for Medicaid and State Operations 
7500 Security Boulevard 
Baltimore, MD 21244-1850 
March 23, 1998  
Dear State Medicaid Director:  
This letter is one of a series that provides guidance on the implementation of the Balanced Budget Act of 1997 
(BBA). The purpose of this letter is to provide information on new section 1905(a)(26) of the Social Security 
Act (enacted in section 4802 of the BBA), which establishes the Program of All-Inclusive Care for the Elderly 
(PACE) as a Medicaid State option.  
The PACE program serves the frail elderly and features a comprehensive service delivery system and integrated 
Medicare and Medicaid financing. Enclosure 1 provides more information about the PACE program.  
In order to provide this new Medicaid benefit, the State must elect to cover PACE services as a State plan 
option and also enter into a program agreement with a PACE provider and the Secretary of the Department of 
Health and Human Services. The program agreement is the contract between the PACE provider, the State, and 
the Federal government, and is the mechanism for receiving federal matching funds for PACE services.  
To satisfy the State plan amendment requirement, we have provided Enclosures 2 and 3 for interim preprint text 
pages, and Enclosures 4, 5, and 6 for interim preprint attachments and supplements. It is important to note that 
submitting the preprint and electing to cover the PACE option merely indicates the State's intent and does not 
obligate the State to enter into a program agreement with the Secretary and a PACE provider to provide PACE 
services.  
Following publication of the interim final regulation implementing the PACE provisions of the BBA, HCFA 
will issue further instructions on complying with these requirements and guidance on PACE provider 
application procedures. We expect to publish the regulation this summer. If you have any questions about 
electing the PACE State option, please contact Laura Gange of my staff on (410) 786-3395 or via e-mail at 
lgange@hcfa.gov.  
Sincerely,  
/s/  
Sally K. Richardson   
Director     
Center for Medicaid and State Operations  
 
Enclosures  
cc:  All HCFA Regional Administrators  All HCFA Associate Regional Administrators for Medicaid and State 
Operations  Lee Partridge - American Public Welfare Association  Joy Wilson - National Conference of State 
Legislatures  Jennifer Baxendell - National Governors Association  HCFA Press Office  
   Enclosure 1   
PACE Program Summary    
Program History  The Program of All-Inclusive Care for the Elderly (PACE) is a new capitated benefit authorized by the Balanced 
Budget Act of 1997 (BBA) that features a comprehensive service delivery system and integrated Medicare and Medicaid financing. 
The program is modeled on the system of acute and long term care services developed by On Lok Senior Health Services in San 
Francisco, California. The model was tested through HCFA demonstration projects that began in the mid-1980s. The PACE model 
was developed to address the needs of long-term care clients, providers, and payers. For most participants, the comprehensive service 
package permits them to continue living at home while receiving services rather than be institutionalized. Capitated financing allows 
providers to deliver all services participants need rather than be limited to those reimbursable under the Medicare and Medicaid fee-
for-service systems.  
The scope of current PACE demonstration sites is very small. There are currently 12 PACE demonstration sites which served 
approximately 4,800 individuals in 1996. Each site serves an average of 200 enrollees, whose average age is 82. Currently, an 
additional 36 sites nationwide are considering the feasibility of PACE.  
PACE Provisions of the BBA  General - The BBA establishes the PACE model of care as a permanent entity within the Medicare 
program and enables States to provide PACE services to Medicaid beneficiaries as a State option. The State plan must include PACE 
as an optional Medicaid benefit before the State and the Secretary of the Department of Health and Human Services (DHHS) can enter 
into program agreements with PACE providers.  
The BBA also limits annual growth of the PACE program. It limits the number of PACE program agreements in the first year after 
enactment to no more than 40; the limit increases by 20 each year thereafter. The statute further provides for priority processing and 
special consideration of applications for existing PACE demonstration sites and to those entities that applied to operate a PACE 
demonstration project on or before May 1, 1997.  
Eligibility - Participants must be at least 55 years old, live in the PACE service area, and be certified as eligible for nursing home care 
by the appropriate State agency. The PACE program becomes the sole source of services for Medicare and Medicaid eligible 
enrollees.  
Services - An interdisciplinary team, consisting of professional and paraprofessional staff, assesses participants' needs, develops care 
plans, and delivers all services (including acute care services and when necessary, nursing facility services) which are integrated for a 
seamless provision of total care. PACE programs provide social and medical services primarily in an adult day health center, 
supplemented by in-home and referral services in accordance with the participant's needs. The PACE service package must include all 
Medicare and Medicaid covered services, and other services determined necessary by the multidisciplinary team necessary for the care 
of the PACE participant.  
Payment - PACE providers receive monthly Medicare and Medicaid capitation payments for each eligible enrollee. Medicare eligible 
participants who are not eligible for Medicaid pay monthly premiums equal to the Medicaid capitation amount, but no deductibles, 
coinsurance, or other type of Medicare or Medicaid cost-sharing applies. PACE providers assume full financial risk for participants' 
care without limits on amount, duration, or scope of services.  
Transition for PACE Demonstration Sites  Currently operating PACE sites have the option to seek extension of their current 
demonstration authority for up to 3 years after the date of promulgation of the PACE regulations. Therefore, States that currently have 
PACE demonstration sites do not need to submit a SPA electing the PACE State option to continue to provide services through the 
demonstration. However, to continue the PACE program at any time the demonstration ceases, a State must elect to provide PACE as 
a Medicaid State plan option in their State plan, and the PACE demonstration site must submit an application to enter into a program 
agreement with the State and the Secretary of DHHS as a PACE provider.   The following PACE sites are currently operating under the demonstration authority:  
Bronx, New York (Comprehensive Care Management)  Susan Aldrich  612 Allerton Avenue  Bronx, New York 10467  
Rochester, New York (Independent Living for Seniors)  Kathy McGuire  311 Alexander Street,#207  Rochester, New York 14604  
East Boston, Massachusetts (Elder Service Plan)  Jean Masland  10 Gove Street  East Boston, Massachusetts 02128  
Portland, Oregon 6/90 (Providence ElderPlace)  Don Keister  4540 N.E. Glisan Street Portland, Oregon 97213  
Milwaukee, Wisconsin (Community Care for the Elderly)  Kirby Shoaf  5228 W. Fond du Lac Ave.  Milwaukee, Wisconsin 53216  
Columbia, South Carolina (Palmetto Senior Care)  Judy Baskins  Two Richland Medical Park, #405  Columbia, South Carolina 29203  
Denver, Colorado (Total Long Term Care)  David Reyes  3202 West Colfax  Denver, Colorado 80204  
El Paso, Texas (Bienvivir Senior Health Services)  Rosemary Castillo  6000 Welch, Suite A 2  El Paso, Texas 77905-1753  
On Lok Senior Health Services  Kate O'Malley  1333 Bush Street  San Francisco, California 94109-5611  
Sacramento, California (Sutter Senior Care)  Janet Tedesco  1234 U. Street  Sacramento, CA 95818  
Oakland, California (Center for Elders' Independence)  Peter Szutu  1411 East 31st Street, Ward B 2  Oakland, California 94602  
Detroit, Michigan (Center for Senior Independence)  Laura Seriguchi  Henry Ford Hospital  1 Ford Place, 5E  Detroit, Michigan 
48202-3450  
Operational Considerations The State plan must include PACE as an optional Medicaid benefit before the State and the Secretary of 
DHHS can enter into program agreements with PACE providers.  
State Plan Election - If you elect the State option to provide PACE services, it will be necessary to clarify in your State plan the extent 
to which PACE services are available as follows:  
You will need to indicate in the State plan if you elect to provide PACE services but have not yet entered into a valid program 
agreement with a PACE provider and the Secretary.  
  
To the extent you enter into program agreements, you will need to include in your State Plan, for each PACE provider, the name of the 
provider, the service area, and the maximum number of PACE participants to be served by the program (see Enclosure 6 for interim 
Supplement to Attachment 3.1-A). This information will need to be updated whenever you enter into or terminate a PACE program 
agreement with a provider and the Secretary, as well as when changes are made to existing program agreements relative to the PACE 
provider name, the service area, or the maximum number of participants to be served by the program.  
Applications - Following publication of the interim final regulation implementing the PACE provisions of the BBA, HCFA will issue 
further instructions on complying with these requirements and guidance on PACE provider application procedures. Until such time as 
HCFA can begin accepting PACE provider applications in accordance with the new legislation and implementing regulations, new 
providers wishing to participate in the PACE program must continue to apply through the demonstration program. For further 
information on the PACE demonstration application process, please contact Steve Miller on (410) 786-6656, or via e-mail at 
smiller1@hcfa.gov.  
  
 Enclosure 2 
State: ______________________________________________________  
Citation 3.1(a)(1) Amount, Duration, and Scope of Services: Categorically Needy (Continued)  
1905(a)(26) and 1934 _____ Program of All-Inclusive Care for the Elderly (PACE) services, as described and limited in Supplement 3 
to Attachment 3.1-A.  
ATTACHMENT 3.1-A identifies the medical and remedial services provided to the categorically needy, specifies all limitations on 
the amount, duration and scope of those services, and lists the additional coverage (that is in excess of established service limits) for 
pregnancy-related services for conditions that may complicate the pregnancy.  
 Enclosure 3 
State: ______________________________________________________  
Citation 3.1(a)(2) Amount, Duration, and Scope of Services: Medically Needy (Continued)  
1905(a)(26) and 1934 _____ Program of All-Inclusive Care for the Elderly (PACE) services, as described and limited in Supplement 3 
to Attachment 3.1-A.  
ATTACHMENT 3.1-B identifies services provided to each covered group of the medically needy; specifies all limitations on the  amount, duration and scope of those services, and lists the additional coverage (that is in excess of established service limits) for 
pregnancy-related services for conditions that may complicate the pregnancy.  
 Enclosure 4 
Attachment 3.1-A Page --  
State: _____________________________________________  
AMOUNT, DURATION AND SCOPE OF MEDICAL AND REMEDIAL CARE SERVICES PROVIDED TO THE 
CATEGORICALLY NEEDY  
26. Program of All-Inclusive Care for the Elderly (PACE) services, as described and limited in Supplement 3 to Attachment 3.1-A.  
__________ provided __________ not provided  
 Enclosure 5 
Attachment 3.1-B Page --  
State: __________________________________________  
AMOUNT, DURATION, AND SCOPE OF SERVICES PROVIDED MEDICALLY NEEDY GROUP(S): 
__________________________________________ 
________________________________________________________________________  
26. Program of All-Inclusive Care for the Elderly (PACE) services, as described and limited in Supplement 3 to Attachment 3.1-A.  
__________ provided __________ not provided  
 Enclosure 6  
Supplement 3 to Attachment 3.1-A Page 1  
State: _____________________________________________  
AMOUNT, DURATION AND SCOPE OF MEDICAL AND REMEDIAL CARE SERVICES PROVIDED TO THE 
CATEGORICALLY NEEDY  
PACE SERVICES  
_____ The State of _______________ has not entered into any valid program agreements with a PACE provider and the Secretary of 
the Department of Health and Human Services.  
_____ The State of _______________ has entered into a valid program agreement(s) with a PACE provider(s) and the Secretary, as 
follows:  
Name of PACE provider: ________________________________________________  
Service area: ______________________________________________________  
Maximum number of individuals to be enrolled: ______________________  
(This information should be provided for all PACE providers with which the State Administering Agency for PACE and the Secretary 
have entered into valid program agreements.)