July 1, 2026

How PACE Works: Capitated Payment, Eligibility and What It Means for Dementia Care

An older man laughing, sat at a table with a younger woman.

PACE, the Program of All-Inclusive Care for the Elderly, is a Medicare and Medicaid program that gives people 55 and older who need a nursing home level of care a full range of medical and social services, so they can keep living at home. Instead of paying for each service, Medicare and Medicaid pay the PACE organization a monthly capitated amount, and the organization takes on the financial risk for the person's care. For people with dementia, that structure matters because nearly half of PACE participants have the condition.

This guide explains who PACE serves, what it covers, how the payment works, what it costs a participant and what it means for dementia care. It is written for provider teams, referrers and program leads.

What Is PACE?

According to CMS, PACE is a type of home and community-based service that provides medical services and supports everyday living needs for certain older adults, most of whom are eligible for both Medicare and Medicaid. An interdisciplinary team delivers the services, with members such as a primary care physician, nurse, social worker, physical therapist and dietitian. CMS notes that PACE is a permanent Medicare benefit.

The program is small compared with other Medicare options but sizable.

The National PACE Association reported that as of September 2025, 194 organizations operated more than 376 centers and served approximately 87,000 participants, according to a StatPearls review. The same source says about 94 percent of participants live in the community.

Who Is Eligible?

According to Medicare.gov, a person must:

Be at least 55 years old
Live in the service area of a PACE organization
Need a nursing home level of care, as certified by the state
Be able to live safely in the community with help from PACE

AARP's Long-Term Services and Supports Scorecard gives the same four criteria and reports that most participants are age 65 or older and have chronic health conditions. Enrollment is voluntary, according to NC Medicaid, and the organization's interdisciplinary team completes a comprehensive needs assessment before someone elects PACE.

PACE isn't a dementia program. It serves frail older adults who meet those criteria. Dementia is common among them. The AARP scorecard reports that nearly half of participants, 46 percent, have dementia.

What Does PACE Cover?

Medicare.gov says PACE covers all Medicare- and Medicaid-covered care, plus anything else the PACE team decides a participant needs, including prescription drugs. Care is usually a mix of home care and visits to a PACE center.

The Medicaid.gov PACE page says PACE becomes the participant's sole source of services. That is a significant difference from Original Medicare, where a person can see any participating provider, and from many Medicare Advantage plans, where care comes through a network.

The HHS guidance portal lists the services PACE provides as including primary care, rehabilitation, adult day care, home health, respite services, caregiver training and transportation.

A coordinated team plans and delivers care. According to Washington State DSHS, the team meets regularly with each participant and their representative. NC Medicaid adds that eight of the 11 interdisciplinary team members for each new participant conduct the initial and annual comprehensive health assessments.

How Does the Capitated Payment Work?

This is the part that most sets PACE apart. According to NC Medicaid:

PACE organizations receive a monthly capitation payment for each eligible beneficiary, combine those funds into a common pool, and pay health care expenses from it.
For dually eligible participants, the organization receives two capitation payments each month, one from Medicare and one from Medicaid.
The financing lets organizations deliver the services participants need without limiting them to services reimbursable under Medicare and Medicaid fee-for-service.
Organizations assume full financial risk for all health care services.

Medicaid.gov describes the financing the same way: it is capped, which allows PACE providers to deliver all the services a participant needs.

The HHS guidance portal points out the trade-off. A capitated rate can benefit a program with a larger base, because unused funds can be kept, but serving high-expense cases can use up funding much earlier than expected.

How Medicare Risk Adjustment Fits In

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Medicare's share of the payment is risk-adjusted, meaning it reflects the expected costs of the people enrolled. CMS has been moving PACE from the older RAPS system to the encounter data system for the diagnoses behind those scores. For 2027, CMS says PACE risk scores will blend 50 percent from the 2024 Medicare Advantage risk adjustment model and 50 percent from the 2017 model. Our guide to the 2027 rate notice and the PACE shift to encounter data covers what dementia programs should prepare for.

What Does a Participant Pay?

According to Medicare.gov, people who have Medicaid pay no monthly premium. People with Medicare but not Medicaid pay a monthly premium for the long-term care part of the benefit and a premium for Part D drugs. There is no deductible, copayment or coinsurance for any drug, service or care the PACE team approves.

The StatPearls review reports that about 80.5 percent of participants are dually eligible for Medicare and Medicaid, 19 percent are enrolled in Medicaid alone, and 0.4 percent pay a premium.

What PACE Means for Dementia Care

A team built around complex needs. People with dementia often have other chronic conditions, medication needs and safety concerns. PACE brings physicians, nurses, social workers, therapists and others together under one plan, with one organization responsible for the outcome.

Day programs and respite. Adult day care and respite services are part of what PACE provides, which gives caregivers a break and gives participants structure and company.

Caregiver training. The HHS guidance portal lists caregiver training among PACE services.

An incentive to keep people at home. Because the organization carries the financial risk for all care, including nursing home care if needed, it has a reason to prevent avoidable hospital and nursing home use.

Limits. PACE is only available in a PACE organization's service area, the person must be able to live safely at home with support, and PACE becomes the sole source of services. Those limits mean it fits a specific group of people with dementia, not all of them.

PACE Compared With GUIDE and Medicare Advantage

GUIDE is a payment model within Original Medicare that adds care coordination and caregiver support to a person's existing care. GUIDE excludes PACE enrollees. Medicare Advantage is a private plan alternative to Original Medicare. Our guide to how GUIDE, PACE and Medicare Advantage compare sets out the differences side by side.

Questions to Ask About a Local PACE Organization

If you refer people to PACE or work alongside one, these questions help:

Does it serve the person's address? Eligibility depends on living in the organization's service area.
How does it handle dementia? Ask about staff experience, the adult day program, behavioral symptom support and safety planning.
What does caregiver support look like? Ask about respite, training and how the team communicates with family.
How would the person get to the center? Ask about transportation and how much time care at the center would involve.
What is the enrollment process and timeline? The team completes an assessment, and the state certifies the need for nursing home level of care.
How does the team share information with outside providers? This matters if a referring clinic stays involved.

Where Elli Cares Fits

PACE teams care for people across the home, the center and transport between them, so information about how a participant is doing can be scattered. Elli Cares gives care teams a clinician dashboard, AI-generated summaries, daily wellbeing check-ins, medication reminders and family observations, so a team can see who may need earlier attention. Elli doesn't replace a PACE interdisciplinary team, provide care or determine eligibility. You can read more on our Value-Based Care page.

Frequently Asked Questions

How does PACE get paid?

Medicare and Medicaid each pay the PACE organization a monthly capitated amount for every enrolled participant. The organization pools the funds, pays for all needed care and takes on the financial risk, according to NC Medicaid.

Who qualifies for PACE?

According to Medicare.gov, a person must be at least 55, live in a PACE organization's service area, need a nursing home level of care as certified by the state, and be able to live safely in the community with help from PACE.

Does PACE cover dementia care?

PACE isn't limited to dementia, and it covers all Medicare- and Medicaid-covered care plus anything the PACE team decides a participant needs. AARP's scorecard reports that nearly half of participants, 46 percent, have dementia.

What does PACE cost?

People with Medicaid pay no monthly premium. People with Medicare but not Medicaid pay a monthly premium for the long-term care part and a Part D premium. There is no deductible, copayment or coinsurance for care the PACE team approves, according to Medicare.gov.

How is PACE different from Medicare Advantage?

PACE becomes the sole source of a participant's Medicare and Medicaid services and requires a nursing home level of care. Medicare Advantage is a private plan alternative to Original Medicare, and dementia is not a criterion for it.

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