The Legislature finds and declares all of the following:

(a) Community-based services to the frail elderly are often uncoordinated, fragmented, inappropriate, or insufficient to meet the needs of frail elderly who are at risk of institutionalization, often resulting in unnecessary placement in nursing homes.

(b) Steadily increasing health care costs for the frail elderly provide incentive to develop programs providing quality services at reasonable costs.

(c) Capitated “risk-based” financing provides an alternative to the traditional fee-for-service payment system by providing a fixed, per capita monthly payment for a package of health care services and requiring the provider to assume financial responsibility for cost overruns.

(d) On Lok Senior Health Services began as a federal and state demonstration program in 1973 to test whether comprehensive community-based services could be provided to the frail elderly at no greater cost than nursing home care.

(e) Since 1983, On Lok Senior Health Services of San Francisco has successfully provided a comprehensive package of services and operated within a cost-effective, capitated risk-based financing system.

(f) Recognizing On Lok’s success, Congress passed legislation in 1986 and 1987 encouraging the expansion of capitated long-term care programs by permitting federal Medicare and Medicaid waivers to be granted indefinitely to On Lok and authorizing the federal Centers for Medicare and Medicaid Services (CMS) to grant waivers in up to 10 new sites throughout the nation in order to replicate the On Lok model.

(g) In response, the Legislature authorized the State Department of Health Care Services to seek a waiver to contract with up to 10 demonstration projects to develop risk-based, long-term care pilot programs modeled upon On Lok Senior Health Services.

(h) The demonstration projects authorized by the Legislature proved to be successful at providing comprehensive, community-based services to frail elderly individuals at no greater cost than providing nursing home care.

(i) In 1997, Congress passed the Balanced Budget Act of 1997 (Public Law 105-33) authorizing states to offer PACE program services as optional services under the state’s Medicaid state plan.

(j) Based upon the success of the demonstration projects in California, the state is now providing community-based, risk-based, and capitated long-term care services under the PACE program as optional services under California’s Medi-Cal State Plan.

(Added by Stats. 2011, Ch. 367, Sec. 19. (AB 574) Effective January 1, 2012.)