Everyone agrees that Rachael Lynn Barnett's birth and her first nine months were uneventful. She learned to sit and stand and spoke her first words, passing all the tiny milestones that mark the development of a normal baby.

Then, in April 1974, Rachael was given a smallpox vaccination.

Within a few days, she developed a fever and a bumpy rash, but while the rash soon subsided, the fever dragged on ominously for two months. Finally, Rachael's temperature jumped to 105 degrees and the child began screaming and banging her head repeatedly against her crib.

The attack lasted 72 hours. Rachael would never be well again. Eventually, as her condition worsened, her doctor would describe her as a "vegetable."

Today, 8-year-old Rachael lies in a crib at the Hospital for Sick Children in Northeast Washington, limp and frail, unable to speak and totally dependent on the people around her. She reacts to touch or sound-- sometimes with a smile -- but her doctors believe that she really does not comprehend what it is she feels or hears. Her thin arms and legs tremble constantly and her crystal blue eyes are expressionless.

Rachael's tragedy is the subject of a legal battle by her parents, Rebecca Barnett and her husband, Eric, a Navy lieutenant commander. In 1978 the couple, who now live in Germantown, Md., sued the Navy for $6 million, convinced that the smallpox vaccination administered to their daughter in a military clinic caused Rachael's illness.

But in the three years since they filed suit, they rejected an offer by the Navy to settle out of court for $1.4 million (because, they said, it would have given the Navy complete control over Rachael's care) only to lose their suit when it came to trial. Then they were informed by the Defense Department that the government would no longer pay for their daughter's medical care. All the while, Rebecca Barnett battled cancer.

It is a case that has evoked even the sympathy of the judges who have had to rule against the Barnetts. But that is little consolation to the couple, who have been left not only emotionally spent and disheartened "It's possible I'm entirely wrong," an exhausted Eric Barnett said recently but fearful as well.

For while Maryland Medicaid will pay their daughter's $53,000-a-year medical bill for the time being, soon, they fear, they may have to find some way to pay for the care they believe their daughter needs out of their own limited resources.

"I will not give up my daughter because of money," Rebecca Barnett, 29, said in a recent interview." . . . At this point Rachael has gained nothing. She's been shoved off . . . She's out there. . . We have literally lost our daughter . . . because we no longer have any control of her at all . . . We don't have the money to keep her."

"The only interest we had in this entire thing was to see to it that Rachael was taken care of on our terms," said Eric Barnett, 33, who earns $27,000 a year as a Navy lawyer.

At issue in the suit is whether the smallpox vaccine administered to Rachael when the Barnetts were ordered transferred to the Philippines was responsible for the child's illness.

The Navy conceded it was negligent in administering the vaccine to Rachael because under standard medical practice, smallpox vaccinations were no longer administered to children under 12 months of age because of the high risk of complications -- including post-vaccinial encephalitis.

But even so, the Navy argued, it could not be held liable for Rachael's illness because it bore no resemblance to those illnesses known to be triggered by smallpox vaccinations and therefore could not have been caused by the vaccination.

For four years after the illness set in, the Barnetts kept Rachael at home with her brother Aaron, now 6 years old. All the while, doctors tried to pinpoint the cause of her illness.

There were signs that Rachael's central nervous system was deteriorating. Sometimes she got worse, sometimes better -- she was always on a "stormy neurological course," as one doctor put it. She made funeral arrangements for Rachael four times between 1976 and 1978.

"My God, I saw a million doctors, and every time you turned around they're saying, 'Put her away . . . get rid of her, she's a social outcast, she's defective'. . . I said, 'Hell, no. She's not responsible for what happened to her. She's my kid.' What am I going to say? 'You're not up to snuff?' " Rebecca Barnett said recently.

Then, in December 1977, a test conducted at the National Institutes of Health showed antibodies in Rachael's blood serum and spinal fluid that may have been directed against the smallpox vaccine virus. The Barnetts were told that the laboratory finding, when coupled with Rachael's physical condition, were "consistent" with a diagnosis that she suffered from post-vaccinial encephalitis -- an inflammation of the brain following a vaccination.

So, in April 1978, after the Navy rejected their claim for damages at the administrative level, the Barnetts filed a lawsuit in U.S. District Court in Baltimore. Soon after, Rachael was placed in the Hospital for Sick Children, where children with chronic diseases and severe physical handicaps are cared for, because her mother had to be treated for suspected cancer.

When the case began before Judge Frank A. Kaufman, the sole question for him to determine was what caused Rachael Barnett's illness.

Two experts testified for the Navy, both from Johns Hopkins University, that the results of the NIH test were inconclusive and that the slow progression of Rachael's disease was inconsistent with the rapid onset usually associated with post-vaccinial encephalitis.

An NIH doctor subpoenaed by the Barnetts testified that, while there were smallpox antibodies detected in the 1977 test, they were not found in some of that fluid that had been frozen and retested in 1979. He also testified that there were no antibodies present in her blood at the time of the trial.

The doctor said he could not explain the differing test results. Under cross-examination, he also said he would not rely on any of those tests to try to diagnose what was wrong with Rachael Barnett.

The Barnetts' key witness was Dr. John M. Pellock, a pediatric neurologist who took Rachael Barnett under his care at the Bethesda Naval Hospital in 1976 when the family first returned to the United States from the Philippines.

Pellock said that, in his opinion, Rachael did not have "classical" post-vaccinial encephalitis. While he would not rely solely on the NIH test to make a diagnosis, he said he would attach significance to the rash that Rachael developed days after the vaccination.

Judge Kaufman, in making his decision, said he agreed with the government's expert that the rash was probably nothing more than an allergic reaction. He also noted that Pellock, unlike the government's experts, had no firsthand experience with the disease he believed Rachael to be suffering from.

The burden of proof was on the Barnetts to demonstrate that Rachael had that disease, Kaufman ruled. They had not done so.

"Money is certainly not going to take away the scars and pain that the Barnetts have suffered, but certainly they would be far better off if the judgment of this court were in their favor," Kaufman said when he announced his ruling. His decision was unsuccessfully appealed to the 4th U.S. Circuit Court of Appeals.

The latest battle lost by the Barnetts was with the Office of Civilian Health and Medical Program for the Uniformed Services (CHAMPUS), which had been paying for the bills at the Hospital for Sick Children.

The Barnetts had challenged in court CHAMPUS officials' ruling that the care that Rachael needs is primarily "custodial" in nature, meaning that all she requires is to be fed and cleaned, given her medicines and monitored in case of a crisis, such as seizures or gagging.

Benefits for such "custodial" care were eliminated by law from the program that paid Rachael's bills in 1977, the government said. In fact, they added, Rachael probably did not qualify for the program when she was admitted to the Hospital for Sick Children in September 1978, even though the program paid her bills. If Rachael had been enrolled in the program before the rules were changed in 1977, she would get continued coverage. But it was too late now, the government said.

Senior U.S District Judge George L. Hart Jr. ruled for the government last month. But, clearly anguished by his own decision, Hart urged the Barnetts to appeal. In the meantime, he said, he would postpone his order cutting off the CHAMPUS funds.

"I have been wrong before and may be wrong again, and hopefully will be again in this case," Hart said.