Pega Supported Case Management in PRPC 5.5 using Covers and Folders and it still supports the same in Pega 7.1. The Pega 7.1 Case Designer has been significantly overhauled and improved in Pega 7.1 but the fundamental concepts and Work Object, Work Item or Case Instance relationships remain the same. There is no need to "Migrate the Application to Case Management". Case Management will continue to work as originally designed.
Folder concept continues to work in Pega7 but explicit testing of the feature is not considered ever. But there are no enhancements considered on Folders in Pega7.
Case designer only shows Work-Cover- cases and not even Work- as well. If customer is using any Work- feature we can suggest customer to convert them into Work-Cover- but not for Work-Folder-.
Folder concept and Cover concept are totally different and asking customer to convert all Work-Folder- to Work-Cover- is not correct. As Folder supports having same work covered under multiple folders which is not the case with Covers as it is always one-one relation.
If we have to leverage "V7 Specific Case Management" for a customer who was earlier in V5 then an 'Application Rebuild' + 'Case-Case Relationship Redesign' is inevitable. 'Bottom line' if the earlier version is prior to V6.1; post V7 upgrade you cannot leverage V7 Specific Case Management (aka Stages&Steps) for already existing cases. However you could create new case types in the upgraded application and gradually move towards a full fledged V7 case management over time.
Consider the following points ...
Case management in V7 revolves around the rule type Rule-Obj-CaseType which was not present prior to V6.1
By default a work object is a WORK-COVER- derivative in V7 whereas it was a WORK-OBJECT- derivative in V5
As such folders are still around in V7.2 however they are not part of V7 Specific Case Management (aka Stages&Steps)