When the doctors at the county hospital removed all his teeth as a treatment for pyorrhea, Ivan Taylor, a 56-year-old welfare recipient, asked about dentures. "Sorry," he remembers being told, "all we do is pull teeth out."

For the next several months, unable to speak clearly and with no money to buy dentures, Taylor discovered the disadvantages of being poor in Arizona.

In most other states, Medicaid funds would have bought him new teeth, but this conservative state has consistently rejected federal Medicaid rules (and money) and now, ironically, may become a model for the rest of the nation because of it.

"It was tough," said Taylor, slumped on the couch in his small south Phoenix home. "There was nothing I could chew on. I had to eat everything boiled."

He tried to sue for the $495 he needed for dentures. But in the end he was saved only by a denture maker who felt sorry for him, the sort of charity that seems to be the only relief for many others left on the fringes of Arizona's health care system.

In an era in which the federal government spends more than $30 billion a year for Medicaid assistance to the poor, Arizona might seem a curious throwback. Yet the Reagan administration is showing a keen interest in other states adopting the same method used by Arizona counties to operate without federal dollars--severe income restrictions, limits on service and cost controls.

How the poor and sick, and the taxpayers who support them, handle the problem in Arizona may have great meaning soon for the rest of the country.

Arizona counties have left out special services like dentures and eyeglasses and ignored much preventive care for the poor. But the biggest savings appear to have come from placing barriers in the way welfare recipients register for free medical care.

State officials estimate that only about half of potential recipients are certified for indigent health care. In some rural counties the percentage appears to have dipped to 10 or 20 percent.

Red tape and conflicting rules make it more difficult to register than in neighboring California and New Mexico, where officials say 80 to 100 percent of their welfare recipients get Medicaid cards.

Without Medicaid's insistence that patients be free to choose their doctors, Arizona's counties may also insist that indigents seek care only at county hospitals or special clinics, which are often some distance from their homes and hard to reach by public transportation.

Arizona's counties spend about $140 million a year in local tax revenues for health care for the poor, enough to cover only half of the people estimated able to qualify. Many counties limit spending by insisting indigents go to distant county hospitals or to designated doctors, or by insisting documentary proof that they meet strict income and residence standards, thus discouraging many potential recipients.

Private doctors and hospitals provide free care or use emergency funds to help some poor not covered by the county programs, but state officials worry about the long-term impact of the lack of preventive care, particularly on children.

Charles Pyle, a staff attorney with Southwest Arizona Legal Aid, described a young, pregnant client who had to return several times because eligibility officials in Pima County changed their minds about needed identification. First they asked for pay stubs from her brother-in-law with whom she was living, then decided that was unnecessary and asked for her birth certificate, obtained with some difficulty from her hometown 150 miles away.

In her eighth month of pregnancy and still unable to receive eligibility or see a doctor, the woman was told she also had to bring a signed statement from a woman who was paying her $12 a week for babysitting.

"They make it very hard to get into the system," Pyle said. "People get frustrated and don't complete the process."

Now, even with cost containment, Arizona's Medicaid-free system is in trouble. The indigent health care fund in rural Santa Cruz County went bankrupt in the last fiscal year and the doctors had to extend service for free until the state could come with bailout money. Santa Cruz and four more rural counties are expected to run out of money for indigent care again this year.

With new state rules limiting how much localities can spend for health services, some polls now show support for acceptance of Medicaid, which has suffered in the past from well-publicized stories of Medicaid fraud in other states.

Republicans who control the legislature have been negotiating with Reagan administration officials to create a new insurance plan which would provide some federal dollars for indigent health care in Arizona, but without Medicaid's regulatory constraints.

Whether, on balance, health care for the poor here has been substantially worse than in states with Medicaid has been as much a matter of dispute as the potential impact of the Reagan budget cuts now being felt throughout the country. But since 1974, when the state legislature passed the Medicaid bill but failed to fund it, Arizona's poor have exerted little pressure on the state government to accept federal funding.

Many doctors and health care officials on both sides of the debate acknowledge that many county hospitals have provided fair to good service and generous private practitioners have picked up enough of the slack to keep dissatisfaction with the system from reaching a critical point.

"I don't like Medicaid, never have," said Dr. George B. Rowland, the Yale-educated director of health services for Maricopa County which includes Phoenix. Yet, the Maricopa County General Hospital, which refused Taylor's request for dentures, is often praised.

Its out-patient waiting rooms, though crowded, are freshly painted, well air-conditioned and have large signs in Spanish and English. A colorful mural of the Arizona desert covers one wall and television sets overhead carry special life-saving information and health skits by television actors.

"The doctors are really good and nice," said Jerry Goodloe, 36, an auto auction driver who was treated at the hospital recently for a head wound suffered in a mugging and for a blood disorder. "If I have the money, I pay, but they haven't come up with any bills," he said.

Rowland said Medicaid requires too much paperwork and encourages too much spending on unneeded medical care since recipients have no incentive to keep expenses low. He said, "What I want is a broadening of the tax base," some way to get more federal money so that more services can be offered in Arizona while still controlling costs.

State and county officials like Rowland insist that the care they provide is just as good as in many Medicaid-funded states.

Although Taylor could have received free dentures in California and New Mexico, 18 states receiving Medicaid funds would have rebuffed him because dental services are not included in their programs.

A U.S. General Accounting Office report describes the savings that can result without Medicaid's insistence that patients be free to choose where they seek care. In 1980, the report said, Arizona's Cochise County contracted with physicians in various towns throughout the county to provide health care services to indigents. All participants in the county program must use these physicians for primary care services.

The change enabled the county "to negotiate a fixed rate per indigent and gain more control over costs," the GAO said.

The report said the county, which paid pharmacies $263,436 for drugs in 1979-80, will save $150,000 in 1981-82 by dispensing drugs from its offices instead of having patients buy medicine from drug stores.

Community health care activists like Cindy Resnick, co-chair of the Pima County Health Services Coalition, argue, however, that the system's limited funding creates other kinds of waste.

She said schools in the Tucson area check all children annually for dental or eye problems. "But if they need glasses or dental work, there is no money to pay for it if they can't afford it themselves," she said.

And even for those who can get service, there are painful waits. Ivan Taylor was back at Maricopa County General last week, this time with what he said was diagnosed as "a rupture in my stomach."

He said he was assured he would get free treatment for it, "but they put me off for six weeks. They were too busy."

Taylor fingered his abdomen gently. "It still hurts," he said.