---
type: claim
domain: health
description: "PACE provides the most comprehensive evidence that fully integrated capitated care restructures rather than reduces total costs, challenging the assumption that prevention-first systems inherently save money"
confidence: likely
source: "ASPE/HHS 2014 PACE evaluation (2006-2011 data), 8 states, 250+ enrollees"
created: 2026-03-10
last_evaluated: 2026-03-10
depends_on: []
challenged_by: []
secondary_domains: ["teleological-economics"]
---

# PACE restructures costs from acute to chronic spending without reducing total expenditure, challenging the prevention-saves-money narrative

The ASPE/HHS evaluation of PACE (Program of All-Inclusive Care for the Elderly) from 2006-2011 provides the most comprehensive evidence to date that fully integrated capitated care does not reduce total healthcare expenditure but rather redistributes where costs fall across payers and care settings.

## The Cost Redistribution Pattern

PACE Medicare capitation rates were essentially equivalent to fee-for-service costs overall, with one critical exception: significantly lower Medicare costs during the first 6 months after enrollment. However, Medicaid costs under PACE were significantly higher than fee-for-service Medicaid. This asymmetry reveals the underlying mechanism: PACE provides more comprehensive chronic care management (driving higher Medicaid spending) while avoiding expensive acute episodes in the early enrollment period (driving lower Medicare spending).

The net effect is cost-neutral for Medicare and cost-additive for Medicaid. Total system costs do not decline—they shift from acute/episodic spending to chronic/continuous spending, and from Medicare to Medicaid.

## Why This Challenges the Prevention-First Attractor Narrative

The dominant theory of prevention-first healthcare systems assumes that aligned payment + continuous monitoring + integrated care delivery creates a "flywheel that profits from health rather than sickness." PACE is the closest real-world approximation to this model: 100% capitation, fully integrated medical/social/psychiatric care, and a nursing-home-eligible population with high baseline utilization. Yet PACE does not demonstrate cost savings—it demonstrates cost restructuring.

This suggests that the value proposition of integrated care may rest on quality, preference, and outcome improvements rather than on economic efficiency or cost reduction. The flywheel, if it exists, is clinical and social, not financial.

## Evidence

- ASPE/HHS 2014 evaluation: 8 states, 250+ new PACE enrollees during 2006-2008
- Medicare costs: significantly lower in first 6 months post-enrollment, then equivalent to FFS
- Medicaid costs: significantly higher under PACE than FFS Medicaid
- Nursing home utilization: significantly lower across ALL measures for PACE enrollees vs. matched comparison (nursing home entrants + HCBS waiver enrollees)
- Mortality: some evidence of lower rates among PACE enrollees (suggestive but not definitive given study design)

## Study Limitations

Selection bias remains a significant concern. PACE enrollees may differ systematically from comparison groups (nursing home entrants and HCBS waiver users) in unmeasured ways that affect both costs and outcomes. The cost-neutral finding may not generalize to other integrated care models or populations.

---

Relevant Notes:
- [[the healthcare attractor state is a prevention-first system where aligned payment continuous monitoring and AI-augmented care delivery create a flywheel that profits from health rather than sickness]]
- [[value-based care transitions stall at the payment boundary because 60 percent of payments touch value metrics but only 14 percent bear full risk]]
- [[medical care explains only 10-20 percent of health outcomes because behavioral social and genetic factors dominate as four independent methodologies confirm]]

Topics:
- [[health/_map]]
