The change “is expected to聽affect the lives of tens of thousands of Americans, perhaps hundreds of thousands” with chronic conditions,聽Gill Deford, a lawyer with the Center for Medicare Advocacy, told reporters on a conference call. “Far too many American families have had to pay for vital services out of pocket” or forgo care they couldn’t afford, he said.

For decades Medicare’s聽guidelines cut off coverage of聽“skilled” nursing and home care聽services if patients weren’t shown to be improving. The care in question might have been physical therapy for stroke victims, home nurse visits for those with Alzheimer’s聽or post-hospital nursing home care for diabetics. Once their conditions plateaued or started deteriorating, Medicare would stop paying.

In a case filed聽in U.S. District Court in Vermont, patient advocates argued聽that the requirement for improvement was聽unsupported by law or regulation. This month the Obama administration and聽the Center for Medicare Advocacy that would change the rules. U.S. District Judge Christina C. Reiss must approve the deal, which was first reported by the New York Times.

The change doesn’t affect聽reimbursement for personal care, physical assistance and other “non-skilled” care that聽accounts for a large portion of聽home health and nursing home spending. Even so, industry groups standing to benefit聽from new spending聽welcomed the news.

“It takes away an unnecessary hurdle from those who need skilled care,” said Greg Crist, a spokesman for the American Health Care Association, a trade group of nursing homes.

“Medicare beneficiaries are entitled to home health services that provide them with the skilled care that can improve their condition but also care that prevents or slows a decline in function,” Val J. Halamandaris, president of the National Association for Home Care & Hospice, said in a prepared statement.

How much new spending the deal will generate at a time of large federal deficits is unknown.聽In 2010 out-of-pocket spending for home health services ,聽according to CMS. The change is also expected to bring聽care to those who聽didn’t receive it previously because聽they couldn’t afford it.

Medicare spends about $20 billion a year on skilled home care, said Bill Dombi, vice president for law at the home care association. For non-skilled home care, Medicaid and private payers spend roughly $60 billion annually, he said.

“I am confident that over time this will not result in any added cost to Medicare,” Rep. Joe Courtney, D-Conn., told reporters. By paying for people to be treated less expensively at home rather than in high-cost聽hospitals or nursing homes, the added skilled-care coverage聽will pay for itself,聽Courtney聽suggested.

The administration took the same line. “This settlement clarifies existing Medicare policy,” said Erin Shields Britt,聽spokeswoman for the Department of Health and Human Services. “We expect no changes in access to services or costs.”

The deal also may bring some聽relief to the state and federal Medicaid program, which pays for large amounts of nursing home care and which has been straining state budgets.

“Medicaid聽is in most respects the payer of last resort,” said Matt Salo, executive director of the National Association of Medicaid Directors. “Medicaid steps in when Medicare stops. So if Medicare is doing more, Medicaid by definition will probably do a a little less.”

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