Main association for elderly targets health-care costs.

America's largest organization of older citizens has embarked on a multifaceted effort to help solve one of the biggest concerns of the elderly: the cost of health care. The American Association of Retired Persons is working with insurance companies to develop programs to protect the elderly from the high costs of long-term medical care, whether at home or in nursing facilities, says Jack Carlson, AARP's new executive director.

The organization also seeks to attack soaring medical costs more broadly, by educating its members and advocating a ceiling on fees physicians and hospitals can collect under medicare.

Most plans that insure against nursing-home costs attract few Americans largely because premiums are high unless subscribers participate by middle age. AARP aims to keep premiums at an affordable level through the size of its risk pool.

This private insurance plan for long-term care parallels a growing concern in Congress over long-term health-care costs. Both liberals and conservatives agree a way must be found to help the elderly and their children finance such care, which is driving tens of thousands into poverty every year. But no one knows where to find the billions of dollars needed to do it.

During the coming year, liberal House Democrats are expected to push a measure, sponsored by Reps. Claude Pepper and Edward Roybal, that would provide federal funds to people who require long-term medical care in their homes. Nursing-home costs average $22,000 per person annually in the US. Home care varies widely depending on the assistance required and the qualifications of the caregiver.

Mr. Carlson says a related issue, ``cost containment'' of health expenditures for the elderly, must also be addressed. ``We have a problem'' with the high cost of long-term care, he says. It's ``critical,'' he adds. Little private insurance exists that is both effective and affordable. Government pays almost nothing through the medicare program, which is supposed to aid the elderly; Uncle Sam's medicaid program, to assist the poor, does finance long-term nursing home costs for the elderly, but only to those who have used up virtually all their money, he says.

But Carlson says it's even harder for many of the elderly to afford care at home. AARP has begun working with insurance companies to ``try to stimulate'' them to provide affordable plans for people over 50 that will insure for care at home and in nursing homes. If necessary, he says, AARP may offer its own insurance in conjunction with one or more insurers: ``We'll look at what's feasible in the private sector.''

``I would hope,'' Carlson says, that within a year AARP will be able to offer long-term health insurance to members that will cover at-home care and stays in nursing homes. The two, he says, must be considered together because the needs of individuals can change, leading to both kinds of care.

Soaring costs of long-term care are but one of many manifestations of rising health-care costs that for years have outpaced increases in the cost of living. Carlson notes that holding down medical expenses in general is another major concern of the elderly.

Although the federal medicare program picks up much of the medical expense of the elderly, they still pay as much as they did in 1966, when the program went into effect. This out-of-pocket expenditure, advocates for the elderly warn, is particularly hard on the 1-in-8 Americans over 65 whose annual income falls below the poverty line.

Carlson says his organization will take a double-barreled approach to cost containment.

For the immediate future, he says, AARP advocates that a ceiling be put on what medicare will pay to physicians and hospitals for each medical procedure. Health economists note that in the past this tack has represented an imperfect approach: Some medical practitioners responded by listing more complex diagnoses that carried higher reimbursements on insurance forms, thus boosting their income despite the controls.

Carlson, an economist himself, concedes ``there will be incentives for some people to indicate the procedure is more expensive than it might be,'' which will require more checking to hold down the complex diagnoses. Yet for the short run he says AARP plans to support price lids ``and do the best we can.''

But ``the long-run answer is education'' of the elderly about medical issues, he says, to ``empower the patients to ask more questions,'' to insist on full information in understandable language, and ``risk assessment'' from physicians. He plans to set up ``a five- to 10-year effort'' to encourage AARP members to take control of their own physical situations.

His ultimate aim: revert to the situation that existed in the US prior to the 1940s, when citizens made their own decisions about treatment for their illnesses, based in part on information provided by physicians. Since then, he says, ``we've lost control'' of these decisions to physicians.