The SHMO and PACE capitated health programs have convinced the U.S. government they can provide cost-effective ways to deal with an aging America.
Congress has given its blessing to the two demonstration projects, which provide long-term care to the elderly for no added Medicare or Medicaid premium.
The new balanced-budget agreement passed by Congress and signed by President Clinton earlier this month makes PACE, the Program of All-inclusive Care for the Elderly, a permanent option for qualified Medicare and Medicaid recipients.
The law also extends the Social HMO-dubbed SHMO-demonstration project until the year 2000 and directs HCFA to develop a plan by Jan. 1, 1999, to make SHMOs a permanent option under Medicare.
Congress' action means these relatively small, not-for-profit operations will be expanding and seeking affiliations with larger systems. The law even allows a demonstration project for up to 10 private, for-profit organizations to qualify as PACE providers.
In 1982, Congress authorized four SHMO demonstration sites in Brooklyn, N.Y.; Long Beach, Calif.; Minneapolis; and Portland, Ore. The Minneapolis site is no longer operational. Six more sites were designated in 1995, but only one has become operational.
About 30,000 seniors are enrolled in SHMOs.
Most seniors who enter the SHMO program are relatively healthy. The goal is to allow the well elderly to remain within their own homes for as long as possible. SHMOs enroll seniors in wide service areas.
SHMOs augment traditional Medicare benefits by adding community-based long-term-care benefits. Special benefits include personal-care assistance to help seniors bathe and dress, homemaker services, meals on wheels, adult day care, respite care and a personal-care manager to design and coordinate an enrollee's program, according to a description provided by Scan Health Plan, the Long Beach-based SHMO.
When a SHMO enrollee's health declines, the program's services delay the need to enter nursing homes by providing traditional nursing home care in the patients' own homes. This saves taxpayer money, said Stuart Byer, a spokesman for Scan. The state pays Scan $2,020 per month for enrollees who could otherwise be in nursing homes. Care in a nursing home averages $3,000 per month, he said.
In contrast, PACE is aimed at the frail elderly, or those whose medical conditions would otherwise require nursing home care. Enrollees receive day care at PACE centers and return to their own homes in the evening, so they are limited to a smaller geographic area.
The federal PACE demonstration program was begun in 1983 to replicate the comprehensive health and social services being provided to the frail elderly of San Francisco's Chinatown at a center run by On Lok Senior Health Services since 1973.
Today On Lok provides primary care through a team of physicians, nurses and other staff, including social workers, to about 650 seniors at five sites in San Francisco. The seniors receive care and hot meals at the center during the day and return to their families in the evening. In-home support services are available.
During a four-year demonstration for HCFA begun in 1979, cost of care for On Lok participants was 15% less than for seniors under the traditional fee-for-service system.
The law allows authorized PACE programs to grow from the current 15 across the country to a total of 40 programs in the first year and an additional 20 in each succeeding year. Initially, PACE providers will be not-for-profit or publicly sponsored, but private, for-profit organizations can now qualify as PACE*providers after participating in a demonstration project.
Earlier this year Scan announced it would convert to for-profit status, but it later withdrew its conversion application for further consideration by its board. The new law does not affect the status of Scan's conversion plans, Byer said.
In the past six months, Scan has grown to 16,000 enrollees from 10,000. It plans to expand in Southern California. Scan could also assist other plans interested in becoming SHMOs, or it could be offered as a carve-out product by other plans, Byer said.
On Lok also is looking to expand.
"We're looking at logical growth. We're looking for some good alliances," said Jennie Chin Hansen, executive director for On Lok.
Partnership with larger HMOs is "not out of the question," she said, provided On Lok's core strength-its service delivery model-is preserved and advanced.