UPDATE 1-US administration agrees to ease in Medicare benefit rules

WASHINGTON, Oct 23 (Reuters) - The Obama administration has agreed to relax Medicare's requirements for skilled nursing and home health care, allowing beneficiaries to qualify for benefits even if their conditions are not expected to improve, according to court documents.

A proposed settlement of a national class-action lawsuit, filed Oct. 16 in U.S. District Court in Vermont, says the government will revise its Medicare manual to make benefits available when care would only ``maintain the patient's current condition or ... prevent or slow further deterioration''.

The new language would ensure broader availability of Medicare coverage for skilled nursing, home health and outpatient care and mark a significant departure from longstanding practices that insist on evidence of medical improvement to sustain coverage.

A spokeswoman for the U.S. Department of Health and Human Services, which oversees the Medicare program for the elderly and disabled, said the proposed settlement ``clarifies'' existing policy. ``We expect no changes in access to services or costs,'' she said, while declining to elaborate.

Judith Stein, director of the nonprofit Center for Medicare Advocacy that is lead counsel for beneficiaries, said the settlement would cast aside a major barrier to care for thousands with chronic or degenerative conditions from multiple sclerosis and spinal cord injuries to Parkinson's, cerebral palsy and Lou Gehrig's disease.

Without Medicare benefits, she said patients and their families are often left to choose between the overwhelming cost of nursing home care and the prospect of managing on their own.

``Very often, people go entirely without the care they need or reduce it to an extent that's dangerous to them,'' Stein said.

She could not say how much additional spending the benefit changes could mean for Medicare, which government forecasters expect to top $590 billion this year. The program's financing is among the main topics for deficit reduction talks that are expected to resume in Congress after the Nov. 6 election.

It was not clear when the court would decide whether to approve the agreement. The case was filed in January 2011.