The Program That Is Free or Unaffordable, and Nothing in Between

There is a Medicare and Medicaid program that delivers all of a frail older person's care through one team and one building, pays for everything that team approves with no deductible and no copay, and exists specifically to keep someone out of a nursing home. As of September 2026 it operated 205 programs in 33 states and the District of Columbia, with 98,066 people enrolled. About 1.24 million Americans live in nursing facilities, and another 607,000 sit on state waiting lists for home and community care.

The usual explanation for that gap is that nobody has heard of the Program of All-Inclusive Care for the Elderly. The more useful explanation is that its two defining features, a single integrated provider and a single capitated payment, each carry a consequence that screens out most of the people who qualify.

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What You Have to Be to Qualify

Four conditions. You must be at least 55, live inside a PACE service area, be certified by your state as needing a nursing home level of care, and be able to live safely in the community with the program's help. The last two pull against each other: you have to be sick enough for an institution and well enough to stay out of one.

What arrives in exchange is unusually complete. Federal rules require the interdisciplinary team to include at least eleven provider types and the organization to hold contracts with at least twenty-six specialties. Primary care, therapy, drugs, dentistry, transportation and nursing home care itself are covered, with no benefit limits and no cost sharing on anything the team approves. Roughly 95 percent of participants live in their own homes.

The Mechanics of a Benefit That Cannot Be Taken in Pieces

The regulation that makes the economics work is the one families never see. Enrollees must receive their Medicare and Medicaid benefits solely through the PACE organization, and the team is responsible for ordering, approving or authorizing all necessary care. The zero cost sharing and the gate are the same sentence. The organization takes a fixed monthly payment and full financial risk, so it controls what gets ordered.

Emergencies are carved out, as is urgent out-of-network care the organization fails to answer within an hour. Everything else runs through the team, which means a new enrollee generally changes primary care physicians the day she joins. For someone who has seen the same internist for twenty-five years, that is the whole decision.

Then there is the trapdoor. Under the enrollment rules, signing up for a standalone Medicare drug plan counts as voluntarily disenrolling from PACE. So does electing the Medicare hospice benefit. A program built for people at the far end of frailty treats the choice of hospice as quitting, and a well-meant drug plan enrollment can end a person's entire care arrangement without anyone intending it.

The Price for Everyone Who Is Not on Medicaid

Here is the design feature that explains the enrollment numbers better than geography does. For someone with Medicaid, PACE costs nothing. For someone with Medicare only, the premium is set equal to the Medicaid capitation rate the state would otherwise have paid, plus a drug plan premium. Those state rates for dually eligible enrollees run roughly $2,800 to $7,700 a month.

So a middle-income retiree is quoted, as a household bill, the number a state Medicaid agency would have spent on institutional care. In 2023 there were 524 Medicare-only enrollees in the entire country, against about 72,000 full-benefit duals. The program is simultaneously free and out of reach, with nothing in the middle.

Why the Map Has Holes

Seventeen states have no PACE at all, because it is an optional Medicaid benefit no state is obliged to offer. The federal ceiling on the number of programs, often cited as the barrier, now sits around 620 against 205 in existence, so it binds nothing. The rationing happens at state agencies, which may cap enrollment, require licenses beyond the federal ones in more than half the participating states, accept applications in narrow quarterly windows, and allow only one application in process at a time. Starting a program takes roughly $5 million to $10 million and fifteen to twenty-four months, and marketing is prohibited until approval, so new centers open nearly empty. California, which holds about a third of national enrollment, paused both new applications and expansions by existing operators in late 2025 for at least two years.

A bill introduced in September would require every state to offer PACE, strike the state enrollment caps, allow enrollment on any day rather than the first of the month, and deem applications approved if the Secretary does not act in 45 days. It has two sponsors and has not left committee. The case for PACE is clinical rather than fiscal, and federal reviewers have concluded outright that it does not save either program money, which is why its expansion depends on a legislature choosing to spend rather than on the arithmetic making the argument by itself.

DISCLAIMER

The content in this email does not constitute an offer or solicitation to buy or sell any financial instrument. All commentary is general in nature and is not directed at any individual investor.

— John Stone