A panel of experts recommended yesterday that the federal government sponsor development of a battery-powered artificial heart to be totally implanted within the body.

A key advisory council promptly endorsed the $70 million, 10-year project.

Such devices, as well as implantable heart-assist devices, could provide a significantly increased life span and an "acceptable quality of life" for 17,000 to 35,000 Americans who would otherwise die of heart disease each year, the panel said.

The controversial air-driven Jarvik-7 artificial heart that has been surgically implanted in four Americans by Dr. William C. DeVries requires an outside power source.

The panel concluded that "totally implanted tether-free systems" are the "only systems with long-term promise" and called the air-driven approach "suboptimal."

Development of a fully implantable, totally artificial heart would represent a major change in direction for the National Heart, Lung and Blood Institute program, which until now has emphasized implantable devices that assist hearts but do not replace them.

"The time is here," said Dr. Robert L. Van Citters, a University of Washington physician who chaired the panel of 13 experts in various fields of medicine, including health policy and ethics.

The report acknowledges that development of such systems "will add another high-cost technology to medical treatment," one which "may displace other uses to which such funds might be put."

Widespread use of implantable heart-assist devices, at a cost of $150,000 each for an average of 4 1/2 years survival, would cost society $2.5 billion to $5 billion annually, about the same amount now spent on kidney dialysis.

While medical suitability should be the prime determinant of who gets the devices, the report said that cost and cost-effectiveness would be "legitimate considerations" in public and health insurance reimbursement decisions. It cautioned that, except as part of government research studies, public funds should not be spent on artificial hearts until reasonable cost-effectiveness is demonstrated.

The new report and its recommendations were endorsed, after a two-hour discussion, by the 18-member National Heart, Lung and Blood Advisory Council, the chief outside group overseeing the federal research institute.

Institute director Dr. Claude Lenfant, who requested the report to provide direction on the future needs, cost and societal and ethical needs associated with artificial hearts, said afterward that he is "surprised" at the strong recommendation.

The heart institute has had an artificial-heart program since l964 and early enthusiasts once predicted that a totally implantable device would be available by l970.

But in the early l970's, the institute embarked on development of a fully implantable, electrically driven device that would assist the left lower heart chamber in pumping blood but not replace that chamber entirely. A fully implantable version of this device, known as a left ventricular assist device or (LVAD), is currently undergoing final animal testing, with hopes of human experimental studies beginning by l987.

This device is driven by an outside battery pack, carried in a vest or on a belt, that is recharged two or three times a day. Signals from the battery are received by a coil implanted beneath the skin and used to power the heart-assist device. An internal battery can store enough power to pump the device independently for 30 to 45 minutes.

The proposed totally artificial heart, replacing the normal heart entirely, would operate on a similar power system.

The panel's 56-page report avoided direct reference to the Jarvik-7 program sponsored by the Humana Heart Institute in Louisville, but it was laced with criticisms of commercial efforts.

"The legitimate corporate desirability for profitability should not jeopardize availability of an optimal device, benefit to the patient, the public interest, or the timely disclosure of data through scientific channels," it said. It also expressed concern about turning artificial-heart operations into "media events.