IN deciding how to spend limited public funds on health care for the poor, should officials draw the line at the number of people served - or the kinds of services provided?This is the basic dilemma underlying Oregon's controversial and unique health plan, which follows the second path. The state has spent two years developing a program which now must be approved by the federal government. Congressional hearings on the plan, which began this week, are being closely watched by other states searching for ways to address the exploding costs of Medicaid as well as congressional lawmakers groping toward a national system of health care. Like all other states, Oregon has not been able to afford the federally mandated medical procedures for all those eligible under Medicaid. Tens of thousands of poor families have been turned away. In response, the state drew up a list of 709 health services and settled on a benefits package that covers what are seen to be the 587 most important. These will be made available to all those eligible for Medicaid, raising the number of people covered from 205,000 to 325,000. Elderly and disabled Oregonians would be added to the program in 1993, as well as those requiring mental health or chemical-dependency services. The plan also requires employers to provide the benefits package to their workers by 1995, which would bring 300,000 currently uninsured into the program. In testimony before Congress this week, Gov. Barbara Roberts (D) said those medical procedures not covered under the proposed plan fall into three categories: "conditions where heroic efforts are unlikely to change the outcome, conditions that get better on their own or with a home remedy, and conditions that are cosmetic or valuable only to the individual." The Oregon health plan also provides some services not required under Medicaid, such as dental care, hospice care, and physical and occupational therapy. State Senate president John Kitzhaber (a physician and chief author of the Oregon health plan) calls it a "comprehensive benefit package which covers the vast majority of those services needed by persons seeking care." He says that providing preventative care or early medical treatment will help avoid "the suffering and cost associated with more serious illnesses." What Oregon wants from the federal government (through the Health Care Financing Administration) is a waiver of the Medicaid requirements defining the amount, duration, and scope of benefits provided. If granted this would be the most dramatic change in Medicaid's 25 years on the law books. There is stiff opposition from those who say Oregon would be "rationing" health care for the poor. Sen. Al Gore (D) of Tennessee said this week that Oregon is "developing a scheme that takes from the poor to help the poor, that preys on the limited political clout of poor women and children, and whose only answer to skyrocketing health-care costs is to ration care." Rep. Henry Waxman (D) of California, chairman of the House subcommittee that oversees Medicaid, is very skeptical of what he calls Oregon's "experiment." There is no guarantee, he says, that the 587 medical services covered under the plan could not be cut further if the state gets in a financial pinch. And he notes that Oregon voters last year passed a property tax limitation measure which requires the state to make up the cost of public schools. "Just as the state is about to fall off the fiscal cliff, the aged and disabled will join the women and children in the experiment, and the ranking of services will be radically altered," he said in opening the subcommittee hearing. Oregon's congressional delegation has lined up behind the health plan. Rep. Ron Wyden (a Democrat on Representative Waxman's subcommittee) says: "The job of choosing priorities is essential, because, no matter where this country heads on health-care reform, there must be tough choices made about priorities." The choices made by Oregon "are about as fair as you can get." To cover the costs of the state plan, Oregon legislators this summer budgeted an additional $33 million. "Oregon will not walk away from our commitment to quality care," Governor Roberts told the congressional panel. Roberts points out that as a single mother she raised a disabled child, and she promises that "if at any time during this five-year demonstration, Oregon cannot meet the quality health care I have pledged, I will personally withdraw our waiver request." Still, skepticism about the fairness of the plan persists. Senator Gore points out that when the Oregon Senate last year considered whether to bring state lawmakers under the plan, the proposal was defeated by more than 2 to 1.