6:35PM EDT November 1. 2012 - A proposed Medicare settlement that allows more patients to receive home health care services could cost the government more initially, but several experts say it could save money in the long term.

"My view is that if we build care coordination into the system, we'd save money," said Kenneth Thorpe, chairman in the department of Health Policy and Management at Emory University.

Under the settlement, the Department of Health and Human Services agreed to change guidelines to allow skilled nursing and therapy services for people who cannot prove their medical conditions will improve. This does not include basic care, such as bathing or cooking. More than 10,000 people who were denied skilled care before the settlement will also be allowed to try again.

Thorpe said 95% of health care costs come from those with multiple chronic health issues, and monitoring those issues could substantially lower costs.

The settlement for Jimmo v. Sebelius makes it easier for people to qualify for at-home skilled nursing because it takes away the "improvement standard" that left out chronically ill or elderly patients because they hoped to maintain their conditions, rather than get better with care.

"Under this proposed settlement, Medicare policy would be clarified so that claims from providers will be reimbursed consistently and appropriately," said Health and Human Services spokeswoman Erin Shields Britt. "Because this proposed settlement would clarify existing policy, we do not expect changes in cost relative to what has been projected."

Proponents of the change say long-term care could keep people from needing more expensive care, such as in hospitals or nursing homes. For example, a nurse who monitors someone with diabetes or a heart condition to make sure he takes his medications and has good vital signs may keep him from needing emergency care, Thorpe said.

The National Multiple Sclerosis Society, the National Committee to Preserve Social Security and Medicare and the Paralyzed Veterans of America were plaintiffs in the case. The Obama administration originally asked that the suit be dismissed because Medicare officials said there was no official policy that required beneficiaries to show their conditions would improve.

Medicare patients often leave the hospital with no follow-up care, and one in five head back to the hospital within one month of admission, often because they don't understand doctors' instructions, they take medications that don't interact well with each other or they simply don't have what they need at home. That costs Medicare billions of dollars every year. Calculating savings, however, isn't a simple matter.

"I don't know that you can predict the costs, but I think they did the right thing," said Don Berwick, former administrator of the Centers for Medicare & Medicaid Services. "Medicare exists to provide people with the care they need."

He said it would be easy to argue that people with chronic diseases who don't get the care they need could get "much worse, much faster," but there's no way to predict direct costs.

Joanne Lynn, director of the Center for Elder Care and Advanced Illness at the Altarum Institute, agreed, but said the shift could mean those on private insurance plans could also receive the benefit if private plans see cost reductions for Medicare.

"The decision makes it clear that Medicare has to cover skilled services when the aim is to maintain function or to slow the rate of decline," she said. "That is huge. Most of us will need that when we are old, and many need it for longer-term disability."

It also means that seniors may not move into hospice care before they are ready, she said. As of 2009, 18% of patients who left hospice care left alive after receiving consistent coordinated care, Medicare Payment Advisory Commission documents show.

Home hospice industry experts say they expect a bump in business, but not a surge, because it will take awhile for providers to understand the new rules. But they also say costs will be hard to predict.

"The consumers' lawyers said it could mean hundreds of thousands of people, while the government said it could be minimal," said Bill Dombi, vice president of the National Association for Homecare and Hospice. "It's been difficult for us to see what the change will look like."

But he's happy about the ruling, calling it an "absolute plus to the business side." Even a 10% increase in home health patients equals about $2 million, he said.

"But if it's $2 million, it's money well-spent," he said. "I think the overall for the government would be savings."