Although the elderly are spending an estimated $1 billion a year on private health insurance to fill the gaps in Medicare coverage, all too often they find their claims still are not covered, says a Federal Trade Commission staff report released yesterday.

The report, delivered to the Senate Special Committee on Aging, says the elderly are paying an average $403 a year for out-of-pocket health expenses, even though more than half of them carry at least one private health insurance policy in addition to Medicare.

In an effort to get complete protection, many people over 65 buy two or more policies which overlap, winding up in one out of four cases with unnecessary and expensive duplication of coverage.

The report, prepared by the staff of the FTC's office of policy planning, says Medicare coverage pays for only 38 percent of the health care costs of the elderly. The individuals must pay for deductibles and coinsurance and for many kinds of care Medicare doesn't cover, including drugs, dental care, eyeglasses, hearing aids, routine examinations and most nursing home care, the report says.

But the so-called Medigap insurance policies leave a lot to be desired, the FTC staff contends. "Most supplemental policies will not pay for pre-existing conditions or the major gaps in Medicare, such as nursing home care . . . and prescription drugs," they said, adding that most policies do not cover the cost of doctor and other charges above the Medicare payment levels.

In addition, the report says large numbers of other policies masquerade as Medigap coverage but typically provide only limited payments for inhospital stays or treatment of dread diseases, such as cancer.

"The lack of consumer information in the Medicare supplement market is so great that it is almost impossible to make rational purchase decisions," the report complains. Few understand the complexities of Medicare and its gaps and there is no standardization of private policies to make comparison shopping possible.

The report's authors suggest a joint project by the Department of Health, Education, and Welfare and the National Association of Insurance Commissioners to evaluate the effectiveness of existing state regulations of Medicare supplement insurance to determine whether standardization mandated by the federal government might bring about competition in the market.