PACE Program Expansion Requires For-Profit Investment, Reduced Regulatory Burden, and Greater Patient Eligibility

Regaining the federal budget’s fiscal sustainability requires fundamental reforms, especially to health care programs that are driving the projected budget deficits. Unfortunately, structural entitlement reforms are politically infeasible. It is essential, consequently, for policymakers to continually scrub the budget for potential efficiency gains. Toward that goal, promoting policies that support the expansion of the PACE (Program of All-Inclusive Care for the Elderly) program can be beneficial.

Wayne Winegarden, PhD | Image: Encounter Books

PACE, officially established in 1997, is widely regarded as a success. It delivers a nursing home level of care to lower-income older adults who are frail, chronically ill, and have potentially significant functional and cognitive impairments but who can still live in their own homes. The services include adult day care, medical care, physical and occupational therapy, dental care, nutrition counseling, and prescription medications.¹

By keeping patients at home and in their communities, the program helps many seniors remain in their preferred living setting. By avoiding unnecessary and more expensive institutional settings such as nursing home care, PACE also saves the federal and state governments a significant amount of money. Based on the current 186 PACE programs, which serve more than 84,000 participants in 33 states and the District of Columbia, I estimated in a recent analysis that the program generates $2.8 billion in annual savings.²

The potential savings are even greater. The program could generate an additional $3.9 billion in savings if it reached the goal of serving 200,000 participants.³ While a total of $7 billion in annual savings will not solve the budget crisis, as the late Senator Everett Dirkson famously quipped, “a billion here, a billion there, and pretty soon you’re talking real money.”

PACE’s benefits go beyond budgetary savings. Patients participating in the program also experience better health outcomes. According to a study in the Journal of the American Geriatrics Society, “PACE enrollees experienced lower rates of hospitalization, readmission, and PAH [potentially avoidable hospitalization] than similar populations.”⁴

The program has captured the attention of current CMS Administrator Mehmet Oz, MD. Oz has singled out PACE on visits to a program site in San Francisco, California, which took place soon after his appointment, and more recently during a July visit to AtlantiCare in New Jersey. He noted that a Federally Qualified Health Center in Atlantic City included a PACE Center that allowed seniors to remain at home, which Oz said, “is how most of us would like to spend our last years of life.”⁵

Given these potential benefits, having the resources to expand the PACE program is essential. Starting a new center typically is costly, between $5 and $10 million, which creates a significant obstacle to expanding the program. A 2015 regulatory change that allows for-profit groups to run PACE programs helps overcome this obstacle because these organizations have greater access to the needed capital while providing the same high quality of care. As a result, the for-profit PACE providers have been driving the program’s recent growth and reaching a wider population.

For instance, a March 2025 evaluation of PACE by NORC at the University of Chicago found that the regulatory changes encouraging for-profit entities has accelerated the growth of the PACE program. For-profit providers also expanded the program to a “more racially and ethnically diverse population.” The study concludes that for-profit entities (including private equity investors) were able to accelerate the growth and reach of the PACE program in underserved and rural markets because they have greater access to capital resources.

In 2025, authors writing in Health Affairs Scholar tracked the different growth rates of for-profit and nonprofit PACE providers, concluding that for-profit programs have been expanding faster. Again, given the capital-intensive needs of PACE programs, the results are unsurprising. The implication is that expanding access to PACE services will likely require increased participation by for-profit providers.⁶

And this is where policy reforms come into play. To expand the benefits of the PACE program to a wider population, policymakers should support the ability of for-profit providers to participate in the PACE program, streamline the regulatory burden for starting and operating a PACE program, and expand the eligibility to incorporate a larger share of the high-need, high-cost patients that may currently have difficulties qualifying.

The PACE program has shown great potential providing enrollees with better care while saving money. For this reason, continued growth of for-profit PACE providers is essential. Fostering this growth requires a regulatory environment that enables both not-for-profit and for-profit organizations to expand the reach of this successful program.

Author Information

Wayne Winegarden, PhD, is a senior fellow in Business and Economics and director of the Center for Medical Economics and Innovation at the Pacific Research Institute.

References

1. PACE services. National PACE Association. Accessed August 18, 2025. https://www.npaonline.org/pace-services
2. Winegarden W. The PACE managed care program:Its purpose, benefits, and potential for growth. Pacific Research Institute. July 2025. Accessed August 18, 2025. https://medecon.org/wp-content/uploads/2025/07/CMEI_PACE_analysis_Final.pdf
3. Nevarez E. New expansions of PACE aim to transform elderly care with integrated healthcare services. Chartis. May 24, 2024. Accessed August 19, 2025. https://www.chartis.com/insights/new-expansions-pace-aim-transform-elderly-care-integrated-healthcare-services
4. Segelman M, Szydlowski J, Kinosian B, et al. Hospitalizations in the Program of All-Inclusive Care for the Elderly. J Am Geriatr Soc. 2014;62(2):320-324. doi:10.1111/jgs.12637
5. Klein HE. AI is not going to replace doctors, it’s going to empower them: Dr Mehmet Oz. AJMC. July 25, 2025. Accessed August 19, 2025. https://www.ajmc.com/view/ai-is-not-going-to-replace-doctors-it-s-going-to-empower-them-dr-mehmet-oz