MEDICAID IS the largest federal program for the poor. Established just 22 years ago, it now costs the federal and state governments $50 billion a year. The second-largest means-tested program -- food stamps -- costs the Treasury less than half as much. Yet Medicaid reaches only 40 percent of the poor.

The program has never lived up to its label. It is pleasant to think that the government provides health insurance to the poor, but it doesn't, quite. Medicaid has been confined to the categories of the poor -- families with children, the elderly, blind and disabled -- who have also been afforded welfare. But Congress in the last few years, in a series of soft steps that taken together would have created enormous controversy, has begun to loosen this connection. The anomalous and underappreciated result is that, in framework at least, this largest program for the poor will emerge from the lean Reagan years much expanded.

Like many other social programs, Medicaid was cut in the first Reagan term. In its case the cut was double, in that the welfare rolls which determine entry were cut as well. But subsequent administration efforts to cap Medicaid have been defeated. And now the resident elves in Congress, led by Rep. Henry Waxman, chairman of the health subcommittee, have begun to build again.

Pregnant women and children have been the wedge. Who can say no to health care for them? The states are now required to offer Medicaid to all pregnant women and young children in households with incomes below their welfare levels, even if the households are not in the welfare subgroups. The states are also permitted to offer the health care to pregnant women and young children, and to the elderly and disabled as well, up to the poverty line; the federal government will continue to pay its share. Half the states have chosen to do so. The reconciliation act that Congress left under the Christmas tree will liberalize the system further. In certain circumstances care will be able to go to children as old as 8 and families with incomes as high as 185 percent of the poverty line.

These are hardly millennial events; there are still many millions of poor people uncovered. The quality of coverage also varies enormously from state to state and in some states -- often the poorest -- is quite thin. There ought to be higher federal standards. Mr. Waxman also failed in an effort to provide more months of Medicaid for women who move off welfare to work. The theory is that loss of Medicaid is a deterrent, but the administration opposes the extension. The issue will come up next in the Senate welfare reform bill.

But the goal is clear even if far off. To qualify for Medicaid, as already with food stamps, someday it may be enough merely to be poor.