As an admirer of Virginia Hamilton, a judge's wife who fills her home with severely handicapped foster children, I listened closely to her quiet, gravelly voiced rage about the possibility that one of her little girls will be put back into an institution.

"They say it's just not 'cost efficient' to keep her in the community," Hamilton said.

She was discussing a 7-year-old girl born with a congenital defect that disconnects the esophagus from the stomach, necessitating extraordinary daily nursing care.

"Now I've had her 14 months and she can go to school for the first time," Hamilton said. "She's made such a terrific social adjustment since she's been with us. I think she will regress socially and mentally if she's reinstitutionalized."

Hamilton's assessment is shared by Dr. Sherahe Fitzpatrick, one of the girl's physicians at Children's Hospital. "She's done tremendously with the Hamiltons. If she was taken out of their home, she'd see that as rejection and in the isolation become withdrawn and exhibit behavioral problems. She probably would not cooperate with her medical regime."

The child became a ward of Prince William County after she was removed from what a social worker described as a "negative family situation." After undergoing many surgeries that kept her in hospitals for the first five years of her life, her condition stabilized to the point that she could be sent home, albeit with a complicated and demanding system of care.

But unlike a luckier middle-class kid who could make it with private health insurance, this child, like so many others who are poor and abandoned and depending on the public sector for her health care, stayed on at Children's Hospital because she had nowhere to go.

"It took a long fight with the Medicaid carrier to get her out of Children's," according to Sue Pillet, a nurse who has looked after the girl. "The trend today is to let the patient out of the hospital as fast as possible, but insurance companies haven't kept up with technological advances. When you look at what they cover for home care it isn't always enough. They don't seem to know that a lot more care can be handled at home these days than was possible in the past."

When Virginia Hamilton and her husband, D.C. Superior Court Judge Eugene Hamilton, agreed to take the girl into their home, they added her to the four of their seven children still at home and to the 30 foster children they have cared for over 15 years. Officials say the current problems are not connected with the fact that the Hamiltons are black and the girl is white.

The early days weren't easy. Not only was Hamilton overwhelmed by the child's care -- she was fed through a tube into her stomach, breathed through a tracheotomy tube and required oxygen 16 hours a day -- but Hamilton found the child was shy, withdrawn and having been institutionalized for so long that she was manipulative of adults. "She did not have any social amenities," said Hamilton.

Enrolling her last October in a Montgomery County school for the orthopedically handicapped, where she's now performing at grade level, Hamilton fought to get the school bus to pick up the child at her door. A home-care team from Children's, including a nurse, now helps with the child's care. On Saturdays, the girl attends an arts and crafts class and she even took a one-day airplane trip to Disney World, complete with nurse, paid for by a foundation. They're hopeful she'll soon learn to feed herself.

Yet the level of rejection and rage in the girl are so great that upon overhearing a discussion between Hamilton and a social worker last week about the possibility of her being reinstitutionalized, she pulled out the plastic tube that helps her to breathe. That caused choking, profuse sweating and disorientation, necessitating emergency action by Hamilton and the nurse.

When queried, Ricardo Perez of the Prince William County Social Services Department, declined to discuss the case. However, he did discuss his quandary.

"Any child with severe multiple handicaps will have their care paid for when placed in a Medicaid-eligible institution and the cost to the county would be minimal. If you attempt to keep the child in the community and provide services, frequently Medicaid will not cover the cost and the county will be faced with paying the cost. I don't know that Prince William County is prepared to pay these staggering costs."

Which brings us to the question of why Medicaid would pay for care in an institution but not at home.

Too often in this society, not only for children but also for older people, because of the antedeluvian regulations of Medicaid, medical and private care are relegated to institutions away from people's families, away from the bolstering psychological support and away from any possibility of normal existence. The rules have to be rewritten so that home care and a humane environment become paramount to the nice tidy little packages created by persons indifferent to human needs.

Not one person who knows this child -- not Hamilton, not the nurses, not the doctors, not even the Prince William officials -- feels she would be better off in an institution. And yet if some flexible, even humane, action is not shown Tuesday when officials meet to decide her fate, that is exactly where this child will be next month -- just in time for Christmas.