The U.S. government on Tuesday proposed expanding Medicare coverage for costly, potentially life-saving implanted heart devices, a decision expected to benefit makers Guidant Corp., Medtronic Inc. and St. Jude Medical Inc.

The Centers for Medicare and Medicaid Services (CMS) unveiled a plan to widen coverage of implantable cardioverter defibrillators (ICDs) by one third so that nearly 500,000 Medicare patients would be eligible.

CMS does not expect all eligible beneficiaries to seek the devices. In the first year, Medicare anticipates at least 25,000 more beneficiaries will get the implants, “potentially saving up to 2,500 lives,” CMS Administrator Mark McClellan said.

“Thousands of lives are going to be saved,” said Medtronic spokesman Scott Papillon, although he expected somewhat fewer than 25,000 patients to receive the devices in the first year.

“Expanding the number of patients who can benefit helps tear down the barriers for people at the highest risk for sudden cardiac arrest,” he said.

“This is a best case scenario for industry,” JP Morgan analyst Mike Weinstein said in a research note. The decision should boost the ICD market by 20 percent to 25 percent in 2005 and 2006, he said.

The current market for ICDs is about $4.8 billion.

From a business standpoint, Papillon said, “the market is going to continue to grow 20 percent or more in the foreseeable future and this will help sustain that growth over the long term.”

The coverage decision was based on a landmark National Institutes of Health trial, funded by Medtronic, called SCD-HeFT, that showed the devices saved lives in a broad group of cardiac patients by shocking the heart to stop an abnormally fast beat.

In the trial, ICDs lowered the risk of sudden cardiac death by 23 percent in patients with heart failure - a chronic condition that weakens the heart and impairs pumping ability - including in patients whose heart failure was not caused by clogged arteries.

Currently CMS reimburses for ICD treatment only in patients whose condition was caused by coronary artery disease.

Medicare, the federal health insurance program for the elderly and disabled, currently covers the devices for roughly 300,000 patients, said Paul Heldman, an analyst at Schwab Soundview Washington Research.

The new proposal would expand coverage to nearly all of the population of patients in the SCD-HeFT trial, CMS officials said.

The only difference is that Medicare plans to limit coverage to patients whose hearts eject 30 percent or less of the blood each time they squeeze, McClellan said. The study included patients whose hearts ejected up to 35 percent.

Banc of America analyst Glenn Novarro, in a research note before the decision, said if CMS used the 30 percent ejection fraction figure, the decision would include about 80 percent to 85 percent of the entire population studied in the trial.

An ICD is a small stopwatch-sized device implanted under the skin near the collarbone. The device delivers Electrical shocks to the heart to stop an abnormally fast heartbeat. The devices cost about $25,000 each.

Dr. Stephen Hammill, professor of medicine at the Mayo Clinic and president of the Heart Rhythm Society, called the decision “quite positive.”

“I’m pleased with the way they’ve expanded coverage,” he said.

CMS said it will work to develop a registry of patients who receive ICDs to help gather more evidence on who is most likely to benefit.

There is a 30-day comment period on the defibrillator proposal. CMS must make a final decision within 60 days after the comment period ends.

Hammill said his group would recommend that CMS allow for a slightly more expensive version of the device that includes backup pacing - the use of a short burst of pacing at the onset of life-threatening heart rhythm that can stop the abnormal rhythm without the uncomfortable shock from the simpler devices used in the SCD-HeFT trial.

Share prices of the major ICD manufacturers rose in after-hours trading. Medtronic rose to $51.10 from a close of $50.85 on the New York Stock Exchange. Guidant climbed to $64.00 from a close of $63.65. St. Jude Medical was up to $73.36 from a $72.20 close.