Proposed regulations to lower health care costs announced this week by the Centers for Medicare and Medicaid Services (CMS) appear to reinforce the existing boundary between health insurance and long-term care: that long-term nursing home care isn’t a required health benefit.
The Notice of Benefit and Payment Parameters for 2027 proposal makes it clear that long-term care, or custodial care, isn’t considered an “essential health benefit” that health plans need to cover – this applies now and under the proposed rules for future plan years, CMS said.
In other words, the proposed regulations maintain that health insurance plans sold through the Affordable Care Act marketplace don’t need to cover long-term care stays when the care is custodial rather than medical, or short-term rehabilitation.
The agency is asking for public comments on the proposed rule by March 11.
At a higher level, the proposed regulations would expand insurance plan flexibility and innovation by eliminating standardized requirements while also strengthening oversight and eligibility verification via tighter standards for insurance agents and brokers to prevent deceptive marketing, CMS said.
As for controlling costs, CMS said limiting federal subsidies for state-mandated benefits would help with rising premiums.
Health and Human Services Secretary Robert F. Kennedy Jr. said the proposed rule will promote innovative coverage prioritizing prevention and long-term health, along with lowering premiums, expanding consumer choice and cracking down on fraud.
“This proposal puts patients, taxpayers, and states first by lowering costs and reinforcing accountability for taxpayer dollars,” CMS Administrator Dr. Mehmet Oz said in a statement. “We are cracking down on improper and misleading practices while giving states and health plans more room to innovate and compete. The goal is simple: lower costs, more choice, and exchanges that work as intended.”
But states have flexibility when it comes to insurance coverage of custodial, or long-term care, covering such services outside of the essential health benefit framework, CMS said. In this case, the state, not the health plan, would absorb the added cost of long-term care.
And this state flexibility may be strained in future years, particularly when considering coverage in the context of Medicaid cuts under the One Big Beautiful Bill Act (OBBBA). The law’s roughly $1 trillion in Medicaid cuts over a decade is expected to indirectly affect the Medicaid rate for SNFs, considering reductions in federal match work requirements and eligibility tightening.
Medicaid made up 62.2% of nursing home reimbursement in 2024, according to CliftonLarsonAllen’s (CLA) December cost comparison report.
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