The demise of the Medicare catastrophic health insurance program last year has left many of the nation's elderly right where they were before: at risk.

Medicare, while providing billions of dollars in insurance each year to the ailing elderly, requires beneficiaries to pay deductibles and "coinsurance" payments equal to 20 percent or more of their bills. At the same time, other costs, such as long hospital stays, are not covered at all.

The Medicare catastrophic law would have plugged a lot of these holes. But because of its cost to the more affluent elderly and the outcry they raised, it is now off the books and the holes remain.

Into this "medigap" has rushed the private health insurance industry, offering policies to pick up some or all of these potential costs. Such insurance, when sold on economical terms by reputable companies, is valuable.

In fact, said Prof. Thomas Rice of the University of North Carolina School of Public Health, repeal of the Medicare catastrophic coverage "has once again made ownership of a medigap policy an absolute necessity."

Most Medicare beneficiaries appear to agree, since roughly three-quarters of them carry medigap policies -- enough to create a $7 billion-a-year market.

But by some estimates, as much as $1 billion of this is wasted. Insurance companies and eager agents, preying on the fear of the elderly of ruinous medical costs, sell more than one policy to the same person. They sometimes misrepresent benefits, and they may encourage people to switch policies unnecessarily -- a move that generates additional commissions for the agent but because of policy waiting periods may leave the consumer without coverage for a time.

These problems have been with Medicare since its inception. Congress amended the Social Security law in 1980 to set minimum standards for medigap policies. But the Baucus amendment, as it is known, left enforcement to the states, and again complaints of fraud and abuse are being heard.

House health subcommittee Chairman Henry A. Waxman (D-Calif.) last week acknowledged that the results of the Baucus amendments have been "very uneven" and that there remains a "serious problem" in the medigap insurance market.

Consumer subcommittee Chairman Doug Walgren (D-Pa.) called the market "literally a morass."

The problems are all the more acute because they come at a time when premiums for medigap policies are rising at the rate of 20 percent or more a year. This means that any duplicative, inappropriate or fraudulent coverage bites even more deeply into the pocketbooks of the elderly.

Help may be on the way, however. Bills are pending in both houses that would simplify policies, step up penalties for agents who sell duplicative policies and require companies to cut premiums or pay out more in claims.

Sens. Thomas A. Daschle (D-S.D.), John Heinz (R-Pa.) and others are pushing the Senate measure; Rep. Ron Wyden (D-Ore.) -- along with Waxman, Walgren and Energy and Commerce Committee Chairman John Dingell (D-Mich.) -- is behind the House version.

In the meantime, medigap insurance remains "a market where confusion, not clarity, is the rule," Gail Shearer, a health policy analyst for Consumers Union, told a joint hearing of Waxman's and Walgren's subcommittees last week.

So until Congress acts, consumers must take the initiative to get the coverage they need. For starters, before buying a medigap policy, they should:

Check for other coverage. Are you eligible for Medicaid? If so, medigap insurance is a waste of money. Does your former employer provide coverage? If so, talk to the personnel or benefits office to see if you need anything else. There's a good chance you don't.

Do you have more than one policy already? If you do, chances are you are wasting your money. If you can't tell what you're getting, have an expert such as a lawyer, accountant or financial planner go over them. (If you go to a financial planner, be sure you know how he or she is paid -- many sell insurance on commission, a fact that may bias their advice.)

If you have one policy and an insurance salesman wants you to switch, get a second opinion. Commissions in these policies tend to be front loaded, so that an agent gets a lot more money from a new policy than a renewal.

If you are thinking of buying a policy, particularly one advertised through late-night television ads featuring a celebrity, have someone you know and trust evaluate it. Many of these policies sound cheap but offer little protection.

If you live in Maryland, you can get free advice and counseling through a state-run volunteer program to assist the elderly with medigap, Medicare, Social Security and related questions.

This Senior Health Insurance Counseling Program is run through the Maryland Office of Aging in Baltimore. It trains volunteers who are then available to help senior citizens with problems in these areas.

For information, call 1-800-AGE-DIAL (243-3425) inside Maryland or 301-225-1270.

Maryland is one of 12 states around the country that have such programs. A study of California's program found savings of $2 for consumers for every $1 spent by the state, according to Consumers Union. In Wisconsin, the savings were $9 for $1.

Other states offering counseling are Illinois, Iowa, Massachusetts, New Mexico, New Jersey, North Carolina, Ohio (on a pilot basis) and Washington, a CU survey found.

In addition, Massachusetts, Wisconsin and Minnesota have taken important steps to simplify medigap policies. These states require insurers to offer basic packages with additional coverage at additional cost, but all of it standardized so that, as CU's Shearer put it, "consumers can compare apples and apples."

Just how important that is was illustrated by a study of policies in Wisconsin. It found that premiums for similar coverage for a 65-year-old woman ranged from $454 to $861 a year, and for a 75-year-old woman from $591 to $1,071.