Rep. William H. Natcher (D-Ky.) yesterday asked the city's Police and Firemen's Retirement and Relief Board to produce within two weeks a list of suggestions to improve what he called a "horribly abused" disability retirement system.

"This situation has to be corrected," Natcher told five members of the board appearing before him. "Maybe I should have done more (over the years), maybe the subcommittee or Congress should have done more, or the District government. The point is we've reached the point now where taxpayers are demanding that something be done, and we've got to do it."

Natcher, chairman of the House District Appropriations Subcommittee, said he would consider incorporating some or the proposed changes into the next bill appropriating money for the District of Columbia.

Percy M. Battle, chairman of the retirement board, reported to Natcher yesterday the 80.4 per cent of all apolicemen, firemen and federal agents receiving retirement benefits on Jan. 1 of this year went out on disability.

When one board member suggested that the situation may appear worse than it is "because of all the Publicity we've received," Natcher said, "What is taking place here is not taking place in any other major city of comparable size in the United States. If it was, we would not spend so much time" on the disability retirement system.

Studies have shown that rates of disability retirement for District of Columbia policemen and firemen are far higher than elsewhere.

The board members offered Natcher and Rep. Clair Burgener (R-Calif.) a number of suggestions to improve the system, and the mood at yesterday's hearing generally appreard to be one of cooperation.

Legislation pending in the Senate would make a number of changes in that law, but Natcher said his subcommittee would not wait for possible action elsewhere.

Battle said after the meeting that the board would put down the suggestions, but said "we have done damn near everything we can do," to dispose of cases fairly under the present law.

"I am completely satisfied with the administration of the law by the board," Battle said. "I am not satisfied with the law itself; that's where we need the changes."

All the board members agreed that a procedure is needed to grant pensions in proportion to the severity of disability. Under the present system the board can only find an applicant disabled or not disabled. Disability pensions range from 66 2/3 to 70 per cent of the applicant's salary, based on years of service - and it is all taxfree.

"We had a man shot through the head, and a man who broke a little finger," said board member Serena Davis. Both received full disability retirement. "We need a rating schedule from zero to 100 percent," she said.

Natcher asked why the board could not turn down applicants in dubious eases "and let them go to the Court Appeals; let them appeal it."

Battle replied that the court has made it clear the law should be interupted liberally on behalf of the applicants.

Board members also suggested placing a more stringent limit on outside income. "I've found some of these people are making more in three weeks (after disability retirement) than they were making on the police department," said Dr. Charles V. Pate.

The present requirements limit disability retirees from exceeding 80 per cent of their preretirement income in two successine years.

Davis asked Natcher to look into the possibility of reassigning disabled policemen from more strenuous duty to desk work. "Many policemen and firemen can do some kind of work," she said.

Other board members criticized police doctors for their reluctance to more carefully scrutinize patients' claims of disability, and asked that the law be changed so the applicant has to prove his disability rather than the board being forced to disprove it.

"We're going to try to do something to help you this time," Natcher said at the conclusion of the meeting. "I say this finally: it's gotta stop, it's gotta stop."