The Office of Management and Budget (OMB) has proposed deep cutbacks in federal aid to St. Elizabeths Hospital that would result in the layoff of 825 full-time staff members, a sharp decline in psychiatric care for inpatients and a 50 percent reduction in the patient load within three years.

OMB's proposal, which has touched off a major budget feud within the Reagan administration, also includes speeding up plans to transfer financial responsibility for the federally run hospital in Southeast Washington to the District of Columbia government or a private nonprofit corporation.

The U.S. Department of Health and Human Services (HHS) told Congress earlier this year that it probably would take 10 years to transfer the hospital, but OMB now says it wants it done within five years.

HHS Secretary Richard S. Schweiker has appealed OMB's fiscal 1983 and 1984 budget recommendations to the president. Schweiker contends that the proposed 22 percent reduction in the hospital's 3,800-member staff and the other cutbacks would be counterproductive and result in "major service disruptions that could lead to serious and embarrassing legal problems" or loss of accreditation.

In a confidential letter to OMB director David A. Stockman dated Nov. 29, Schweiker also complained that the proposed speed-up in transferring responsibility for St. Elizabeths contradicts assurances given by HHS officials.

"We have publicly stated, and testified before Congress, that the planned disengagement for in-patients would occur over a 10-year period," Schweiker said in his letter.

"To propose now that the assumption of financial responsibility by the District should occur over a five-year time period . . . would not only undermine our credibility, but would also jeopardize the agreements we have already gone on record as supporting," he added.

An HHS official, who asked not to be named, said yesterday that if OMB prevails, the quality of patient care at the hospital would be seriously impaired and there also could be serious budget implications for the cash-strapped D.C. government.

The city currently provides 17 to 22 percent of the hospital's $128.4 million annual operating budget to defray the cost of treating patients who live in the District. Under the OMB plan, the city's share of the total cost may increase substantially within the next few years.

D.C. Budget Director Gladys W. Mack said this week that city officials "are in a dialogue" with the OMB concerning St. Elizabeths 1984 budget, but declined to speculate on the spending levels she expects President Reagan to recommend to Congress in January. She would not disclose details of the discussion.

In his letter, Schweiker disputed OMB's claim that the hospital had an excess of staff members, compared with the average of the 10 largest state hospitals.

OMB proposed eliminating 525 positions during the current fiscal year and 300 more in fiscal 1984, as well as barring any additional hiring of employes for outpatient services.