Four years ago, a little Iowa girl made headlines because of an anomaly in the federal Medicaid rules.

Katie Beckett had suffered respiratory problems after a bout of viral encephalitis. Her parents were told that Medicaid would pay $12,000 a month to cover their daughter's treatment in a hospital but would refuse to pay $2,000 a month to provide the same therapy at home.

The problem was that the Becketts were not poor enough to qualify for Medicaid under normal circumstances.

But a special rule in effect in most states said that after a child had been in a hospital for 30 to 90 days, the state would no longer consider the parents' income to be available to cover medical costs. Thus, the child would be considered poor and eligible for Medicaid.

That rule applied, however, only as long as a child remained in a hospital or nursing home. If the child went home, the parents' income was again considered available.

After President Reagan cited the Beckett case as an example of senseless overregulation, the Health and Human Services Department found an obscure provision in a Supplemental Security Income law that would allow Katie to qualify for benefits at home. The department also set up a board to review similar cases.

The board approved benefits for 200 people in situations similar to Katie's. Now it is going out of business, because new Medicaid regulations provide a new mechanism for states to apply for such waivers