The government has thrown a potential £500m Brexit lifeline to 180,000 British pensioners in EU countries outside the UK who rely on the NHS to pay for their healthcare.

The health minister, Stephen Hammond, has said the government is committed to covering all treatments that began before exit day for up to 12 months afterwards in the event of no deal.

“The UK government has committed to fund healthcare for UK nationals (and others for whom the UK is responsible) who have applied for, or are undergoing, treatments in the EU prior to and on exit day, for up to one year, to protect the most vulnerable,” he said in a ministerial written statement.

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The move will come as a welcome relief to pensioners in countries such as Spain and France who were facing the immediate loss of the EU reciprocal arrangement whereby the NHS reimbursed the cost of their medical treatment. Such a prospect was a particular concern to cancer patients and those with ongoing medical needs.

However, the offer to cover costs for just one year for treatment agreed or started before exit day prompted fury, with some Britons in the EU questioning what would happen if they fell sick after the UK left the EU.

“If the person has paid into the system all their lives, retired to an EU country in good faith with all the reciprocal arrangements in place, they could be left high and dry if they, say, get cancer after 29 March,” said one.

Another Briton, retired to France, said it was discrimination. “Given that I, like many others, paid national insurance and taxes for 37 years of work as a teacher, and must continue to pay UK income tax until I die no matter where I live, I feel grossly insulted and betrayed. Why should I be treated any differently from any other retired government servant living in the UK?”

The government added the proviso that its commitment would still require it to reach agreement with each member state. However, Hammond said: “We are hopeful that they will remain willing to treat patients and accept reimbursement and are in discussions to seek such an agreement.”

British nationals living abroad have also been reassured by Hammond that if they “face changes in how they can access healthcare” they may return to live in the UK and use the NHS if they wish from day one.

“A British citizen who moves to the UK can be considered ordinarily resident upon arrival if it is clear that they are here to reside on a properly settled basis for the time being,” Hammond said.

Pensioners who have already signed up to the so-called S1 reciprocal care payment arrangements and who are “resident in EU member states” on exit day “can use NHS services in England without charge when on a temporary visit to England”.

This means those who have paid into the system all their lives and have chosen to retire in another country will not have to worry if they need treatment if they fall ill or have an accident on return visits to the country, something many were concerned about.

British citizens who return to live in the UK part way through their treatment will also be able to access NHS services. According to evidence given by a government official to a select committee, the UK spends £650m on reimbursing EU countries for healthcare. Of that, about £500m is for the healthcare costs of the 180,000 British pensioners living in EU countries outside the UK, 70,000 of whom live in Spain.

Ireland is the second most popular destination for retirement, with 44,000 people who have contributed national insurance for the qualifying years in the UK living in the country, including Irish nationals. Hammond reiterated that the “UK and Irish governments are committed to continuing to facilitate access to healthcare” in the common travel area.

A similar number live in France, with Cyprus ranking as the fourth most popular destination for retirees, with 12,000 on S1 healthcare arrangements.

The updated no-deal notice will also apply to UK nationals who have already planned to get treatment under EU reciprocal rules in another country in the bloc.

Holidaymakers, however, are still being advised to take out private health insurance.