Beat first 4 ingredients at medium speed with an electric mixer until creamy.
Gradually add powdered sugar alternately with 3 Tbsp. milk, beating at low speed until blended and smooth after each addition.
Melt caramels with 1 Tbsp. milk in a small microwave-safe bowl at HIGH 1 minute or until smooth, stirring at 30-second intervals. Fold caramel mixture into buttercream, creating swirls. (Do not completely blend.)