A D.C. Superior Court judge this week denied a court order that would have prevented the Department of Human Resources from reducing Medicaid benefits. The order was sought in a class action suit filed by the Gray Panthers.

The Gray Panthers, an activist organization of the elderly, charged the DHR failed to give clients proper notice and hearing opportunities before insituting the reductions.

The department last month eliminated most over-the-counter drugs from Medicaid converage and established fees for prescriptions and eyeglasses purchased through the program.

In a brief order signed Monday, Judgn Fred L. McIntyre said he denied the request for a preliminary injuction because the Panthers' lawyers failedto show during a hearing that Medicaid recipents would be irreparably harmed by the reductions as alleged.

The judge also said he was not convinced that the charges would be proven if the temporary order were granted and a trial conducted in the case.

A nearly identical suit filed by theGray Panthers against DHR was settled out of court last APril. In that case it was alleged that DHR violated notice and hearings procedures when it removed several hundreds non-prescription drugs from Medicaid converage.

The reduction in serivces and items covered by Medicaid here appears to be part of a growing retrenchment in the 12-year-old program that costs more than $15 billion a year in federal and local money.

The Gray Panthers' attorney, Hebert Semmel of the Center for Law and Social Policy, handled a smiliar case against the Virginia Department of Health recently and was unsuccessful.

A federal judge rules that Virginia can constitutionally limit the number of days that Medicaid will pay for a recipient's hospitalization. The court had earlier ordered, however, that the state provide public hearings before imposing such reductions in benefits.

In Washington, the Gray Panthers and other organizations have vigorously fought any attempts by DHR to reduce the benefits, through legal action as well as demonstrations and marches.

Last year, DHR tried to remove some40,000 persons from Medicaid eligibility because their inclusion was optional for the city and not required under federal regulations. The protesting groups successfully opposed the action in a nearly year-long battle.

Spokesmen for the citizens groups contend that many elderly and handicapped persons live on fixed incomes and cannot afford to pay more for medical needs. DHR maintains, however, that reductions in benefits are necessary for economic reasons, and to keep the entire program for folding.

The suit ruled on by Judge McIntyre was aimed at DHR's announcement in mid-January that it would stop providing Medicaid payments for most non-prescription medicines as of Feb. 15. Other specific changes included:

A 50-cent initial payment on all prescriptions purchased with Medicaid cards.

$2 fee for all eyeglasses.

A limit of one pair ofeyeglasses for each recipient every two years, except for school children under 21 and person with significant changes in their vision during that peroid.

The reductions have been instituted, and will remain in effect in light of this week's court ruling.

DHR officials said they have no estimate of the amount of money that these changes in the program will save.