The Iowa state judge who heard the case of Charles Michael Moss said the blind, deaf and mute World War II veteran had been "cast into an Orwellan purgatory with no route of escapes."

Moss, 69, had been living in a DesMoines nursing home, using all but $5 a month of $408 he received in Social Security and veteran's benefits to pay his nursing home bill.Since Moss' income was was not sufficient to pay the bill, Medicaid - a state and federal program of medical aid to the poor - paid the balance of the approximately $2-a-day nursing home fee.

But when Moss' veteran's benefits were increased by $124 a month - all of which went to the nursing home - the lowa Department of Social Servies stepped in. Moss, the department sad, was ineligible for Medicaid because his income was too high by $2.60, according to federal regulations.

The state moved to cut off Moss' Medicaid payments. Only the ruling of the state district court judge, now under appeal before the lowa Supreme Court, blocked the action.

This was one of several examples cited in testimony recently before the health subcommittee of the House Select Committee on Aging, descriptions of what is happening to the elderly poor as states try to bring their soaring Medicaid costs under control.

A man in a large Southern state with an annual income of $14,000 could not get Medicaid help for his wife despite massive medical bills resulting from her terminal illness. To get his wife into a nursing home, the man took the only legal step he could. He divorced his wife, making her eligible and leaving him facing bankruptcy because of the bills.

"These type incidents occur daily," Sam T. Thurmond, former Georgia Medicaid director, testified. After Georgia suspended dental services in 1975, Thurmond said, "I actually had people in Georgia writing me . . . that they were gluing their teeth in."

Federal and state expenditures for Medicaid have increased from $6.3 billion in fiscal 1971 to an estimated $18.6 billion in fiscal 1977. Although the elderly poor account for only about 18 per cent of all Medicaid recipients, they receive roughly 38 per cent of all money spent for Medicaid.

States are responsible for anywhere from 2 to 50 per cent of the cost of Medicaid, depending upon the per capita income of the state's population. Wealthier states pay more and poorer states pay less.

As the cost of Medicaid has risen states have begun eliminating services and materials formerly offered - such as eyeglasses, hearing aids, dental work and prothetic devices. According to subcommittee chairman Claude Pepper (D-Fla.), 20 states have curtailed their Medicaid coverage in the last two years.

A series of witnesses appearing before the Health subcommittee called for changes in the present law to relieve the states of the increasing financial pressure they find imposed on them by the soaring cost of Medicaid.

Jerald Stevens, Massachusetts secretary of human services, told the subcommittee that the Carter administration's hospital cost containment program, which is scheduled for submission to Congress on Monday, should include controls on capital expenditures for long-term care facilities such as nursing homes in addition to the expected national quota to be imposed on hospital construction.

Stevens, along with other witnesses, said expenditures for nursing home care - 40 per cent in the case of Massachusetts - are the dominant factor in Medicaid spending.

All of the witnesses testfying criticized federal regulations for Medicaid that emphasize institutional care, thus driving up the costs, rather than permitting less expensive home care programs.