Many seniors and those planning for retirement have long believed Medicare would cover their long-term care (LTC) costs; however, this is a misconception. Historically, Medicare has only covered acute, short-term LTC needs—such as skilled nursing or rehabilitative care following a hospitalization—and did not pay for custodial or ongoing LTC services that many older adults require as they age.

Since 2019, the line between Medicare and LTC coverage has become somewhat more blurred. Medicare Advantage (MA) plans have been permitted to offer benefits for certain LTC-related supplemental benefits that were previously only covered by traditional LTC insurance or Medicaid. While this expansion has increased access to some LTC-related benefits, the scope and dollar value of these benefits remain limited compared to the high cost of LTC services.

This article provides an introduction to LTC costs, reviews the types of LTC-related services now included under MA, examines the proportion of LTC costs covered by MA plan benefits, and discusses some key challenges associated with offering more comprehensive LTC coverage through MA.

MA supplemental benefits do not provide comprehensive LTC coverage

The risk of requiring and subsequently needing to fund LTC is significant for Medicare-eligible beneficiaries (typically seniors age 65 and over). A person age 65 has a greater than 50% likelihood of requiring LTC at some point in their remaining life.¹ The median annual costs nationwide were approximately $70,000 to $80,000 for home health and community-based/assisted living services, and about $110,000 to $130,000 for skilled nursing facilities in 2024.² Prior to 2019, the Centers for Medicare & Medicaid Services (CMS) did not allow MA plans to offer items or services as supplemental benefits if their primary purpose was daily maintenance.³ To help address seniors’ needs beyond the medical services typically provided by MA plans, CMS expanded the “primarily health-related” component of the MA supplemental benefit definition, paving the way for LTC-related services, including in-home support services (IHSS), adult day care, support for caregivers of enrollees, and home-based palliative care. MA plans offer these services as standalone benefits, where every member is entitled to the benefit, or as combined/flex benefits, where several services are covered under a single benefit limit. Beneficiaries choose from those offerings which services to receive and in what quantity.

We utilized the 2025 Milliman Medicare Advantage Competitive Value Added Tool® (MACVAT), along with a review of the summary of benefits documents from carriers offering these benefits, to assess the coverage level of LTC-related benefits. On average, MA benefits cover less than 3% of a beneficiary’s expected annual LTC costs for those requiring home health services, assuming the beneficiary needs LTC services throughout the entire calendar year. As a result, approximately 97% of LTC costs must be paid by individuals out-of-pocket or by other payers, such as traditional LTC insurance or Medicaid.

More robust coverage of LTC services would be difficult in the current MA environment without significant changes to the existing Medicare program. A plan with comprehensive LTC coverage would require extremely uncompetitive premiums and/or face significant financial losses due to the high cost of LTC. Additionally, MA plans that provide coverage similar to traditional LTC insurance would be exposed to considerable anti-selection risk. This risk arises because members can enroll or disenroll in MA plans annually and are likely to choose the richer MA plans with LTC coverage only when they anticipate needing LTC in the near future.

Background

LTC services and needs

LTC refers to personal care or custodial services for individuals who can no longer perform activities of daily living (e.g., eating, bathing, transferring), whether in the home, community or assisted living facility, or skilled nursing facility. These services are significantly and often prohibitively expensive for individuals to pay for out-of-pocket without traditional LTC insurance or Medicaid coverage. As previously noted, 2024 median annual costs for LTC ranged from $70,000 to $130,000 depending on care setting. Additionally, individuals often need LTC for more than one year—on average, women need LTC for 3.5 years and men for 2.5 years.⁴

LTC-related benefits in MA

MA plans are required to cover the services provided through the Medicare Fee-for-Service (Medicare FFS) program and have the option to cover supplemental benefits not offered through Medicare FFS. While we outline the services covered by Medicare FFS that might be perceived as LTC-related in the following section, it is important to note that these services are not designed to meet the LTC needs typically addressed by traditional LTC insurance policies and are therefore excluded from our analysis.

Medicare FFS benefits

MA plans are required to cover both skilled nursing facility care and home health services. However, there are important coverage limitations that prevent the required Medicare-covered benefits from being a viable replacement for traditional LTC insurance.

Medicare FFS covers care provided in a skilled nursing facility on a short-term basis after a hospital stay. The first 100 days of skilled nursing facility care are covered by Medicare FFS, with a copayment of $209.50 required for days 21 to 100 in 2025. Additionally, an inpatient hospital stay of at least three days is required before skilled nursing facility coverage begins. While MA plans may offer richer cost sharing and/or waive the three-day inpatient admission requirement, most typically do not extend coverage beyond 100 days. Medicare FFS also does not cover custodial care; instead, it provides coverage for medical care aimed at treating, managing, or observing more acute medical conditions, such as treating a broken hip or assisting in recovery from a stroke.⁵

Medicare FFS covers home health services to beneficiaries who are homebound, meaning that leaving the home is either not recommended due to their condition or requires significant effort.⁶ Medicare, however, does not cover custodial or personal care related to activities of daily living if that is the only type of care needed. Additionally, Medicare FFS does not cover homemaker services such as shopping and cleaning unless they are part of a broader care plan.

MA supplemental benefits

CMS announced a reinterpretation of the “primarily health-related” component of the MA supplemental benefit, starting in 2019, to consider an item or service as primarily health related if it is used to diagnose, compensate for physical impairments, acts to ameliorate the functional/psychological impact of injuries or health conditions, or reduces avoidable emergency and healthcare utilization.⁷ CMS specified a number of LTC-related supplemental benefits that would be considered allowable under the “primarily health-related” definition reinterpretation, including:

• IHSS
• Adult day care
• Home-based palliative care
• Support for caregivers of enrollees

CMS requires these benefits to be recommended or provided by a licensed medical professional, though coverage limitations will vary by plan. By contrast, traditional LTC insurance policies typically require a member to be assessed as requiring assistance with at least two activities of daily living for benefit eligibility. Unlike LTC insurance, MA plans do not have an elimination period—the period after benefit eligibility before receiving benefits—and cost sharing is rare. Generally, the reduced benefit eligibility requirements and lack of cost sharing result in less restrictive access to LTC coverage in MA plans relative to traditional LTC insurance. However, as we discuss in the following section, the LTC coverage provided by MA plans includes limitations that make the benefits significantly less comprehensive than traditional LTC insurance.

LTC benefit prevalence in MA

Despite slow initial plan uptake of these benefits in 2019, the prevalence of LTC-related supplemental benefits increased through 2023. More recently, we have observed a decrease in the offering of these benefits. The percentage of beneficiaries in general enrollment plans with coverage for these benefits is displayed in Figure 1.

MA LTC benefit coverage

To evaluate the value of the LTC-related benefits provided by MA plans, we examined the proportion of expected LTC costs covered by these benefits. We focused on the IHSS benefit, as this was the most common LTC benefit covered by MA plans. It is worth noting that IHSS, by definition, covers services at home and would not include other LTC coverage that would occur in a facility.

Given the high cost of LTC, a key consideration is the extent to which the MA benefits cover the total annual cost of LTC. The structure of the MA benefit offering influences the value of the LTC benefits. MA plans can offer these either as standalone benefits, where every member is entitled to this benefit, or as combined/flex benefits, where several services are covered under a single benefit limit. Beneficiaries choose which services to receive and in what quantity.

Regardless of benefit structure, we found that for beneficiaries requiring LTC-related home health services, the MA benefits cover, on average, less than 3% of a beneficiary’s expected annual LTC costs, assuming the beneficiary requires LTC throughout the entire calendar year, as shown in Figure 2.

Standalone benefits

We estimate the average standalone IHSS benefit included in MA plans covers between 2% and 3% of the expected annual LTC costs, assuming the beneficiary requires LTC services throughout the entire calendar year. Most standalone IHSS benefits in MA plans provide a fixed number of IHSS hours per year. Among the plans analyzed, the majority covered from 20 to 90 hours of IHSS annually, with the average plan covering approximately 50 hours per year. Assuming an individual needs 40 hours of LTC per week, the average standalone MA benefit would cover approximately a week and a half of LTC.

Combined/flex benefits

We estimate the average combined/flex LTC benefit included in MA plans covers approximately 0.5% of the expected annual LTC costs, assuming the beneficiary requires LTC services throughout the entire calendar year, even if the entire bundled benefit was allocated to IHSS. For MA plans that include IHSS as part of a combined/flex benefit, most package limits range from $50 to $1,000, with the most common package limit being $300. Given the 2024 median hourly cost of a home health aide was $34 nationally,⁸ these plans would cover, on average, no more than 30 hours of LTC services, assuming the entirety of the combined benefit was spent on IHSS. For the most popular package limit of $300, this benefit would cover approximately nine hours of home care services.

Comprehensive LTC coverage headwinds

Current LTC coverage offered through MA plans is insufficient to fully address the comprehensive LTC needs of seniors, as these plans typically cover only a small fraction of annual LTC expenses and offer a limited range of covered services. Providing more extensive LTC coverage is unlikely to be feasible within the existing MA environment due to general pullback on supplemental MA benefits, the importance of maintaining competitive premiums, and anti-selection risk.

MA benefit pullback

MA market headwinds, including recent limited increases in MA payment rates (i.e., CMS revenue payments), an increase in plan liability risk in Part D from the Inflation Reduction Act (IRA), elevated medical and pharmacy claims trends, and Star Rating methodology changes, have led the MA industry, on average, to pull back on supplemental benefit value offered to members, as measured by the Milliman MACVAT metric.⁹ As MA organizations consider cutbacks to dental, over-the-counter items, and other supplemental benefits that drive plan enrollment, there is unlikely to be carrier appetite for LTC-related benefits in general, much less meaningfully comprehensive benefits.

Insufficient plan revenue and uncompetitive premiums

MA payment rates are based on projected Medicare FFS costs (with no supplemental benefit coverage) and, therefore, make no allotment for the costs of LTC-related services in MA. As a mandatory supplemental benefit, the LTC-related services must be funded through a combination of MA rebates and plan premiums. Though these payments are risk-adjusted, since LTC services are not offered in Medicare FFS, the risk models do not consider the cost of LTC services in the coefficients underlying a member’s risk score.

MA rebates are generated from bid savings relative to benchmarks, less the portion of savings that is shared with CMS. Because a portion of savings is shared with CMS, a plan must sacrifice more than $1 in margin ($1/MA rebate %) to offer $1 of supplemental benefit. Given the expected costs, this dynamic would make offering a benefit with adequate LTC coverage prohibitive margin-wise and require a significant (and uncompetitive) plan premium.

Anti-selection risk

In addition to uncompetitive premiums, a plan offering the amount of coverage necessary to provide adequate LTC coverage would have significant anti-selection risk, as members are able to enroll or disenroll annually and are very likely to consider the richer LTC plans only when future LTC needs may be known or imminent. Given the MA industry reaction to the increase in plan liability risk with the IRA in 2025 (e.g., reducing Part D benefits), it is extremely unlikely any carrier would take on the risk associated with more comprehensive LTC coverage. Without a compulsory requirement to offer comprehensive LTC coverage, any plan offering this benefit would likely face an insurance death spiral¹⁰, with members only selecting the plan when they have an imminent LTC need.

Methodology

We used the 2025 version of the Milliman MACVAT to summarize enrollment, prevalence of LTC-related services, and associated benefit limits. The Milliman MACVAT uses publicly available data released by CMS, which is then compiled, sorted, and summarized into a user-friendly format. We used February 2025 enrollment and benefit data for MA individual general enrollment plans. We excluded Employer Group Waiver Plans (EGWPs), Prescription Drug Plans (PDPs), Cost and Medical Savings Account (MSA) plans, Special Needs Plans (SNPs), and Medicare-Medicaid Plans (MMPs) from our analysis.

We estimated the average standalone MA IHSS benefit (for plans covering the benefit) by analyzing the summary of benefits documents for the largest MA plans offering this benefit. We accounted for over 65% of the total beneficiaries with IHSS coverage in our analysis. Given the unstructured format of the plan benefit package (PBP) notes field or references in the notes to the plan website we were not able to account for 100%. Similarly, we studied MA plans that included IHSS as part of a combined/flex benefit that were entered in the PBP. Given the dollar amount was missing from some PBPs, we analyzed the benefits for plans accounting for approximately 95% of the total beneficiaries with IHSS coverage through combined/flex benefits.

The average number of hours and average dollar limits for standalone and combined/flex benefits, respectively, are on a plan segment count-weighted basis.

Conclusion

In its present form, MA alone does not provide sufficient LTC coverage to meet the needs of many seniors. The services covered by Medicare FFS that might be mistaken for LTC coverage are primarily intended to address acute medical needs rather than the ongoing custodial care typically associated with LTC insurance. While some LTC-related services can be offered as supplemental benefits, the substantial revenue required to offer comprehensive LTC coverage limits the financial support that MA plans can provide, resulting in minimal coverage of LTC needs.

Caveats, limitations, and qualifications

Chris Giese, Annie Gunnlaugsson, and Jeremy Hamilton are actuaries for Milliman, members of the American Academy of Actuaries, and meet the qualification standards of the Academy to render the actuarial opinion contained herein. To the best of their knowledge and belief, this article is complete and accurate and has been prepared in accordance with generally recognized and accepted actuarial principles and practices.

The material in this article represents the opinion of the authors and is not representative of the view of Milliman. Therefore, Milliman is not advocating for or endorsing any specific views contained in this report related to the MA program.

The information in this article is designed to provide information on the richness of LTC benefits covered under MA plans. This information may not be appropriate and should not be used for other purposes. We do not intend this information to benefit any third party that receives this work product. Any third-party recipient of this article who desires professional guidance should not rely upon Milliman’s work product but should engage qualified professionals for advice appropriate to their specific needs. Any release of this article to a third party should be in its entirety.

In preparing our analysis, we relied upon public information from CMS, which we accepted without audit. However, we did review it for general reasonableness. If this information is inaccurate or incomplete, conclusions drawn from it may also be inaccurate.

¹ U.S. Department of Health and Human Services. (2022, August). ASPE Research Brief. Long-term services and supports for older Americans: Risks and financing, 2022. Retrieved June 26, 2025, from https://aspe.hhs.gov/sites/default/files/documents/08b8b7825f7bc12d2c79261fd7641c88/ltss-risks-financing-2022.pdf.

² CareScout. (n.d.). Calculate the cost of long-term care near you. Retrieved March 27, 2025, from https://www.carescout.com/cost-of-care.

³ Medicare (2018, April 2). Announcement of Calendar Year (CY) 2019 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter. Centers for Medicare & Medicaid Services. https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/Announcement2019.pdf.

⁴ U.S. Department of Health and Human Services. (2022, August). ASPE Research Brief. Long-term services and supports for older Americans: Risks and financing, 2022. Retrieved April 3, 2023, from https://aspe.hhs.gov/sites/default/files/documents/08b8b7825f7bc12d2c79261fd7641c88/ltss-risks-financing-2022.pdf.

⁵ Medicare. (2025, February). Medicare coverage of skilled nursing facility care (CMS Product No. 10153). Retrieved May 14, 2025, from https://www.medicare.gov/publications/10153-medicare-coverage-of-skilled-nursing-facility-care.pdf.

⁶ Medicare. (n.d.) Home health services. Retrieved May 14, 2025, from https://www.medicare.gov/coverage/home-health-services.

⁷ Medicare (2018, April 2). Announcement of Calendar Year (CY) 2019 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter. Centers for Medicare & Medicaid Services. https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/Announcement2019.pdf.

⁸ CareScout. (n.d.). Calculate the cost of long-term care near you. Retrieved March 27, 2025, from https://www.carescout.com/cost-of-care.

⁹ Friedman, J., Cates, J., & Phillips, E. (2024, December 16). State of the 2025 Medicare Advantage industry: General enrollment plan valuation and selected benefit offerings. Milliman. https://www.milliman.com/en/insight/state-of-medicare-advantage-general-enrollment-2025.

¹⁰ Association of Health Care Journalists. (n.d.). Death Spiral. In Health journalism glossary. Retrieved May 14, 2025, from https://healthjournalism.org/glossary-terms/death-spiral/.