A federal judge in Vermont may approve a proposed legal settlement intended to guarantee Medicare benefits for people with chronic health conditions who need nursing and therapy services at home or in skilled-nursing and outpatient facilities.

The settlement would resolve (PDF) a national class-action lawsuit that alleges HHS, Medicare contractors and administrative review boards across the country have rolled out a “clandestine” policy to limit Medicare coverage for nursing and therapy services even though official CMS rules say those benefits should be covered.

Specifically, the critics say Medicare contractors and administrative officials have been denying nursing and therapy services for patients who weren't expected to show long-term improvements in their medical conditions. Patients with chronic conditions like multiple sclerosis, Parkinson's disease, paralysis, cerebral palsy and Alzheimer's were denied Medicare and Medicare Advantage benefits under this so-called “Improvement Standard,” the lawsuit alleged.

The agreed-upon changes would alter the Medicare manual to say that eligibility for skilled-nursing, home healthcare and outpatient physical therapy services coverage “does not turn on the presence or absence of beneficiary's potential for improvement from the therapy, but rather on the beneficiary's need for skilled care,” the settlement says.

The settlement would clarify coverage rules in the Medicare manual and publicize them to Medicare contractors and administrative courts; conduct tests to ensure the changes are being enforced; and allow Medicare recipients who were wrongly denied coverage on or after Jan. 18, 2011, to apply for re-review of their cases.

The lawsuit, Glenda Jimmo et al. v. Kathleen Sebelius (PDF), was filed in U.S. District Court in Vermont in January 2011. The proposed settlement, filed Oct. 16, 2012, is awaiting approval from Vermont District Chief Judge Christina Reiss.

HHS would not be admitting wrongdoing as part of the settlement. The named plaintiffs included at least five patients who said they were denied Medicare benefits, plus the National Committee to Preserve Social Security and Medicare, and five other interest groups.

Gill Deford, director of litigation for the Center for Medicare Advocacy, one of the public-interest law firms representing the plaintiffs, said officials with the center are hoping the judge will approve the settlement as it was filed. “But it's impossible to know, because first she has to consider any written and oral comments that class members will have an opportunity to make,” Deford said in an e-mail.

Val Halamandaris, president of the National Association for Home Care & Hospice, which was not a party to the case, said the proposed settlement would correct the gradual drift that had led to many beneficiaries being denied services by Medicare contractors even though the CMS' rules never changed.

“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,” he said in an e-mailed statement. “We are very pleased that Medicare has recognized that some of our most vulnerable citizens were wrongly denied benefits.”

A spokesman with the CMS declined to comment on the proposed settlement.