CMS Pub. 100-11, ch. 1, § 10

In the 1970's the federal and state governments became increasingly interested in the

development of community-based services. As a result, waivers of federal Medicaid

requirements allowed state governments to experiment with fee-for-service programs for

frail elderly and disabled beneficiaries. One such program was the Programs of All-Inclusive Care for the Elderly (PACE), which was developed at On Lok Senior Health

Services in San Francisco through a series of demonstration projects. On Lok enrollees

were among the frailest elderly in the community, those considered most at risk or

otherwise needing institutional placement to receive long-term care services. With a one-year grant from The Robert Wood Johnson Foundation (RWJF), On Lok initiated a

project to determine the feasibility of replicating the model in other parts of the country.

In 1986, Congress authorized waivers for ten replication sites. In 1987, the RWJF

authorized start-up grants for replication sites and a grant to On Lok to provide technical

assistance. The first replication sites initiated three-waiver demonstrations in 1990 and by

1994 there were ten replication sites operating under waivers. The PACE demonstration

operated until PACE was established as a permanent Medicare program by the Balanced

Budget Act of 1997 (BBA).

The PACE Protocol was first developed in 1990 as part of a cooperative effort involving

staff from CMS, then the Health Care Financing Administration Office of Research

Development and Information, States participating in the PACE replication, and PACE

sites, including On Lok Senior Health Services. Most of the features of PACE continued

from the demonstration into the permanent program, including the focus on the targeted

population, the frail elderly, and the capitated funding mechanism.

In September 2006, CMS awarded $7.5 million in grant funds to organizations

developing PACE in rural service areas. Fourteen organizations each received over

$500,000 for the establishment of a PACE program in their area. This grant program was

initiated through the Deficit Reduction Act of 2005. The funding was available through

September 30, 2008, and was provided to all fourteen grantees that met the requirements

as a PACE provider as demonstrated through the PACE provider application approval

process.