Ashby allegedly killed Mr Adams, a P user with gang connections, when a drug deal turned sour.
The judge who granted Ashby bail said the best estimate was that he would live only a matter of months and it was debatable whether he would survive until his trial, scheduled to start in March.
Police say Ashby, a company director whose business name is suppressed, shot Mr Adams three to four times in the upper back and once in the head with a semi-automatic pistol before dumping his body at Wairakei, near Taupo.
Mr Adams' remains were discovered in a makeshift grave dug with a digger in a geothermal area in June last year.
Ashby has denied the allegations.
Justice Paul Heath said he was satisfied from evidence that Ashby's illness was terminal and that he would require more constant care and regular appointments with an oncologist as time progressed.
Justice Heath said Ashby's condition meant there was no real risk of reoffending or flight, and issues relating to interference with witnesses could be managed by a 24-hour curfew and electronic monitoring.
"I'm satisfied that the circumstances to which I have referred, coupled with compassionate considerations affecting Mr Ashby, and more importantly his immediate family, justify the grant of bail," the judge's ruling said.
Ashby was given bail until the trial on March 9, on condition that he notify police no later than 24 hours before any scheduled medical treatment, or immediately if he needed emergency care.
Police were allowed the option of escorting Ashby to his appointments.
The judge suppressed Ashby's bail address and ordered him not to contact a list of people, including prosecution witnesses, or consume alcohol or non-prescribed drugs.
The Sensible Sentencing Trust said people facing allegations of serious and violent crimes should remain behind bars.
"Compassion's got no place to play there," spokesman Garth McVicar said.
