The board chairman of the nation's largest health insurer charged yesterday that "unnecessary" treatments and tests for breathing and oxygen are costing hospital patients and their health plans $1.25 billion a year, by "conservative estimate."

The Blue Cross and Blue Shield Association, whose 103 member plans cover more than 100 million Americans, warned doctors and hospitals that it will seek to eliminate this expense, at first by voluntary effort, then by halting payments, where necessary, starting next year.

"Respiratory care," the overall term for several procedures, is now given to one hospitalized patient in four at a cost of at least $5 billion a year.

By "conservative" estimate, 25 percent of that use is unneeded, according to Dr. Marvin Shapiro, chairman of the board of Blue Cross-Blue Shield.

The effort to limit this care was announced here by the association as its latest step in a six-year-old "medical necessity" program aimed at curbing runaway health costs.

Blue Cross-Blue Shield plans have already halted most payments for nearly 100 outdated medical and surgical procedures.

They have also stopped paying for thousands of hospital tests routinely given to patients on admission, whether or not their doctors had ordered them.

These curbs have saved "hundreds of millions of dollars," Blue Cross-Blue Shield officials estimated.

But the "biggest potential savings so far" could come from eliminating unneeded use of respiratory treatment or testing, they said.

At first, association president Barnard Tresnowski explained, there will be only an "educational program" to urge doctors and hospitals to eliminate wasteful care. "We want to emphasize that we will not be reducing coverage, and we will not be denying any claims at the start of this program," he said.

"Ultimately, however," he added, "our plans have to be prepared" to change payment policies, and "that could be 12 or 15 months from now" if education alone doesn't work.

A set of guidelines for proper respiratory care has been developed with the help and approval of three major specialty groups: the American College of Physicians (specialists in internal medicine), the American College of Surgeons and the American College of Pediatrics.

The most familiar respiratory care is the oxygen therapy given many heart and other patients.

But more common is "intermittent positive-pressure breathing," in which either air or a medication-mist is forced into the lungs by machine.

"IPPB" is most often used in patients with lung conditions such as emphysema or chronic bronchitis, and in patients with breathing or lung problems after surgery. Like other respiratory treatments and tests, it is sometimes helpful and sometimes life-saving.

Although "it is not routinely necessary," Tresnowski said, it accounts for one respiratory procedure in four, at a daily cost of perhaps $150 to $200 per treatment.

Oxygen therapy is often vital in heart patients or accident victims.

"The problem," Shapiro said, is that a doctor may order it given continually "and the treatment may continue for days, even when the patient's ready to go home."

Likewise, he said, a respiratory therapist may give a post-surgical patient a simple device to exercise his lungs--by blowing into a tube to move a small ball--and instruct him to use it every few hours.

Then, Shapiro said, the hospital may make a charge for every supposed use, though the patient needs no more teaching.

"We want to stop payment for that kind of thing," said Shapiro, an Encino, Calif., radiologist.