Senate Finance Committee Chairman Lloyd Bentsen (D-Tex.), strongly reaffirming his commitment to catastrophic-illness insurance legislation, predicted yesterday that it would become law by year's end despite concerns about its costs.

He also said it would be a "serious mistake" for the president to veto a bill that would provide added protection for the nation's 31 million Medicare beneficiaries.

Bentsen, at a meeting with reporters, also affirmed his support for a prescription drug benefit in the bill. Despite opposition from the drug industry and the Reagan administration, the Democrat said such a provision should cover all beneficiaries "across the board," not just low-income ones.

But he said that it might be necessary to "phase in" the drug benefit to avoid adding too big an additional premium on top of the standard Medicare premium. That premium is taking an unexpected leap to $24.80 in 1988.

On another subject, America's children, Bentsen said he was growing "very impatient with what's going on out there" and said he would introduce legislation to create a bipartisan national commission to study the economic, health and social support needs of children. He indicated he would like it to report back by Aug. 15 -- in time for its recommendations to become a focal point in the 1988 elections.

The catastrophic measure was first proposed by Secretary of Health and Human Services Otis R. Bowen and has already passed the House, but with benefits and costs substantially enlarged over Bowen's proposal, the White House has threatened to veto it if it is not pared back.

The major House add-on opposed by the White House would help Medicare beneficiaries pay for outpatient prescription drug costs exceeding $500 a year.

Bentsen sponsored the bill in the Senate, and the Finance Committee approved it 20 to 0 last spring without a drug benefit, but objections from a handful of Republican senators have delayed the start of debate. Sens. John Heinz (R-Pa.) and George J. Mitchell (D-Maine) are expected to offer a drug-benefits amendment with a $600 cutoff.

The White House contends that the drug provision will cost about $6 billion a year, not the $2 billion estimated by the Congressional Budget Office, and that other provisions will cause an "explosion" in Medicare costs.

Asked if the tide is turning against the proposal, Bentsen said, "Certainly not. It is an idea whose time has come. Consensus has been achieved." He said costs estimated by HHS are "grossly exaggerated," but indicated willingness to compromise on some issues.

As for veto threats, Bentsen grinned and said, "I think we are going to have such a good bill when we get through that it would be a serious mistake for him to veto it."