An article on the Federal Page yesterday incorrectly identified the new undersecretary of Health and Human Services. He is Don M. Newman.

Despite his training as a physician, as a member of the Indiana legislature and as a popular two-term governor, Otis R. Bowen has experienced something like culture shock over the past four months. In a wide-ranging interview, the new secretary of health and human services described the difficulties he has faced in taking over the huge department, and set out his priorities for the years to come.

On Dec. 13, "the day I was sworn in, the passback from OMB came," he said, referring to the all-but-final list of decisions by the Office of Management and Budget on how much money it would allow for HHS programs in the president's budget proposals for fiscal 1987.

"I'd only just heard of a passback, let alone seen one," he said with a low-keyed laugh.

"We did make some appeals and were successful to a degree" in altering OMB proposals for cuts -- such as getting the administration to stretch out to four years instead of one the transition to a tough new system of reimbursing hospitals for capital outlays, Bowen said. But he said he came into office too late in the budget process to have the impact he would have liked.

Reviewing his first months as secretary, Bowen said he feels he is beginning to dig in and get the job in hand.

One indication is that the department, which had 105 overdue reports and 70 overdue regulations when he came in, has sent enough proposals to OMB, which must grant final clearance, to cut the backlog in half.

Another indication is that a large number of vacant top-level executive jobs are being filled. Some lacked permanent appointees for more than two years because of disagreements between former secretary Margaret M. Heckler and the White House.

Wayne Newman, a longtime Indiana associate of Bowen, has been nominated as undersecretary. Thomas R. Burke, an HHS health specialist with whom Bowen worked as head of a Medicare advisory group two years ago, has become chief of staff. White House health specialist William L. Roper has been nominated to head the Medicare and Medicaid programs. Assistant Secretary Dorcas R. Hardy has been nominated as commissioner of Social Security.

Robert Raclin, a former Merrill-Lynch executive, has been named a deputy undersecretary. Anthony (Tony) McCann, a former Senate Budget Committee specialist in domestic programs, has been named assistant secretary for management and budget, with Joe Antos as his deputy. Jim Delaney is executive secretary. Wayne Stanton, an aide when Bowen was governor, is head of the new Family Support Administration.

Last winter, in preparation for the job, Bowen recalls, "I made a long list of things I perceived to be problems. I ended up with 27 or 28." Trying to set realistic goals, he pared that to the top half dozen.

The first is to develop a plan for health insurance to protect people against catastrophic costs from severe illnesses and long-term care. Catastrophic insurance would limit an individual's out-of-pocket payents to a specified amount per year so that he or she is not financially ruined by a costly illness.

Other top priorities, the secretary said, are to solve the medical malpractice lawsuit problem, to improve the health of newborn babies by persuading expectant mothers not to smoke or drink, and to curb teenage pregnancy and strengthen the family.

Bowen also said he expects to grant some increase in Medicare payment rates to hospitals for fiscal 1987 (he will decide on the amount, up to 2 percent, in June) and that he hopes to ensure that the National Institutes of Health continue to be among the world's "premier" medical research centers.

In addition, he said he wants to focus on "the cure and management of crisis diseases," such as acquired immune deficiency syndrome (AIDS) and Reye's syndrome.

Last summer, Bowen and Burke wrote an article advocating creation of a catastrophic protection benefit for Medicare patients, covering most costs except nursing homes, to be financed by a raise of about $12 a month in the Medicare premium, now at $15.50 a month.

Instead of endorsing this proposal, President Reagan directed Bowen to conduct a broad study of the issue this year, with a view toward covering in some way all or most of the population, not just Medicare beneficiaries, and also bringing the private insurance industry into the picture.

Some observers saw the president's call for a study as a defeat for Bowen at the hands of conservatives who disliked his proposed use of the existing governmental mechanism and of private firms selling supplementary "Medigap" insurance to the elderly.

Industry had pushed the White House not to endorse any plan that could reduce its business by handling everything through the government and the tax system. But Bowen does not see this as a big setback.

He "had some hopes" of fast action on his earlier proposal, he conceded, but the president's mandate for a study now gives Bowen an opportunity to seek a solution for the whole population -- a much more ambitious and satisfying aim, he said.

He now regards his Medicare proposal as one of several possible approaches for the aged, saying, "I am not wedded to that particular plan" and "I would be willing to sacrifice a little bit" on cost to find a private-sector solution on Medicare.

For the non-elderly working population, getting employers to add catastrophic-illness protection to existing private workplace health insurance policies seems to him the best approach. For people with no insurance, there is no obvious solution at hand as yet. But Bowen said one possible answer is to look to the local level. He cited an Indiana program in which each county contributes to a state fund for services for the poor.

To cover nursing home care in old age, he said, a system of "medical IRAs" might be a good approach.

His second departmental priority is to find a solution to the medical malpractice insurance problem. Bowen said he would prefer that the states work out their own solutions, recalling that in 1975, as Indiana's governor, he got enacted "what I think is the envy of all the states -- an upper limit as to what one could sue for and a limit on lawyers' fees."

The limit on awards was $500,000 -- of which $100,000 came from the insurance of the doctor and hospital, and $400,000 from a patient compensation fund financed by a surcharge on insurance premiums.

"The key was a medical panel -- three doctors . . . who would issue a report on whether it was malpractice or a nuisance suit," Bowen said. The report was given to the court, and as a result "a lot of suits were dropped" before trial.

"It was very effective. In New York last year neurosurgeons paid $101,000 for one year's" malpractice insurance but "in Indiana, $13,000 to $14,000." His own rate last year as a practicing family physician was $1,302.

Another priority, he said, is to increase competition in medical care and to foster "capitation" schemes, such as health maintenance organizations or HMOs, in which for a flat fixed fee for a year or some other time period, the patient gets all needed care without further charges.

Conceding that there have been cuts in NIH research funds and AIDS funds, Bowen said he will seek to ensure that cuts come from overhead paid to universities, not basic research.

The new secretary said HHS does not feel the AIDS funds that were cut were really needed for research or could be efficiently used.

Beyond that, he said that so far "there is no evidence of any reduction in quality of care" because of Medicare and other funding cuts.

"I'm a firm believer you can always cut a little and get more productivity," he said.