Two-thirds of the nation's 3.3 million elderly with incomes below the poverty line are not eligible for Medicaid, the federal-state medical program for the poor, according to a report released yesterday by the Commonwealth Fund.

An estimated 3.6 million of the 4.3 million "near-poor" elderly also are ineligible, the report said.

As a result, even if congressional plans for "catastrophic" health insurance are added to Medicare coverage, millions of low-income elderly will remain without adequate health coverage and face crushing out-of-pocket medical costs, the Commonwealth Fund's Commission on Elderly People Living Alone predicted.

"The Medicare program, supplemented by Medicaid for the poor, is not working for the vast majority of elderly people with incomes below $5,393," the estimated poverty line for a single older person in 1987, said commission director Karen Davis, who heads Johns Hopkins University's health policy and management department.

The report estimated that out-of-pocket spending by poor elderly people lacking Medicaid averages $815 a year. Of the near-poor elderly -- those with incomes between $5,393 and $8,036 in 1987 -- "one-third are reduced to poverty by their out-of-pocket payments for medical care," it said.

The reason so few of the elderly poor and near-poor are covered by Medicaid is that states are free to set income cutoffs for coverage. The report said the average cutoff level for a single person is 83 percent of the poverty line and for a couple 104 percent. In addition, even for those who are eligible, some states provide a more meager range of benefits than others.

The Medicare catastrophic bill would limit out-of-pocket medical expenses to about $1,800 a year. But for an older person with $5,000 or $6,000 income a year, that is a huge sum. And Medicare still would not cover some large items, such as major mental health bills, eyeglasses, dental care and long-term nursing home care.

Under the House version of the catastrophic bill, state Medicaid programs would be required to pay all the Medicare premiums and deductibles for all elderly Medicare beneficiaries below the poverty line, including the first $1,850, but this specific provision -- which would not help the near-poor -- is not in the Senate version and, in any event, would still not pay for services Medicare doesn't cover.

The commission report proposed full Medicaid coverage for all elderly below the poverty line be made mandatory, costing states $450 million and the federal government $550 million under current matching arrangements. The report also said the near-poor should be allowed to "buy in" to Medicaid coverage on a sliding scale based on income.