Spending on medical care consumes a large share of the domestic budget, so it is not surprising that the administration has targeted Medicare and other health programs for substantial cuts. Coming after three years in which medical services have been under pressure, the newly planned cuts are likely to be felt sharply by both patients and health-care providers.

The administration's current plans apparently call for even tighter limits on Medicare hospital payments than were included in proposals informally transmitted to Congress earlier this month. Reforms put into law in 1983 already had set fixed charges for Medicare-eligible hospital patients, but those charges are adjusted yearly to cover increases in treatment cost. The new plan would force hospitals to absorb the full amount of medical-price increases for one year. It would also extend the current freeze on doctors' payments for Medicare patients. Allowances for the extra costs of teaching hospitals also would be sharply cut.

Although Medicare covers only the elderly or permanently disabled (in general, people on Social Security) and pays only part of their bills, these are the people most likely to run up big hospital bills. Consequently, any Medicare cut puts a big squeeze on hospital finances. Tightening that squeeze are past and proposed cuts in Medicaid, the federal-state program that pays medical bills for certain poor families and for other people -- usually nursing-home residents -- who have used up all their own money paying medical bills.

Medicaid never covered more than about 60 percent of the poor -- primarily the elderly, severely disabled and children in female-headed families. In recent years, budget cuts have further limited eligibility, so that now less than half the poor are estimated to be covered. Many poor and near-poor people who are sick simply go untreated. Others have their bills paid by local governments. But a major part of the cost of indigents' care has traditionally been shifted by hospitals to the bills of paying patients. Now with Medicare -- and private insurers -- putting new limits on hospitals, they will become still less willing to treat the indigent.

Almost every hospital can make some economies without sacrificing the quality of care. And hospitals with substantial profit cushions may find the new limits easy to live with -- although these are not typically hospitals that open their doors to the needy or contribute to the excellence of U.S. medical training. But it's well to remember that most of the billions of dollars in health-care savings that the administration seeks will be paid for ultimately by patients -- in higher prices or poorer care.