The Veterans Administration yesterday asked the Supreme Court to rule that most alcoholics are victims of "willful misconduct," rather than an illness, in a case that could have significant consequences for government agencies, employers, insurance companies and the estimated 10 million alcoholics in the United States.

If the court decides that alcoholism is not a disease the ruling could be interpreted to affect treatment policies for other illnesses caused by "willful misconduct" -- ranging from lung and heart diseases caused by smoking to traffic accident injuries caused by speeding.

The case was brought by two veterans who claim that alcoholism -- as a disabling illness -- prevented them from taking full advantage of VA education benefits during the 10-year limits following their military discharges. They charge that the VA violated the federal Rehabilitation Act of 1973 when it denied them the extensions it allows for other veterans with physical or mental problems that are "not the result of their own willful misconduct."

The act prohibits discrimination in federal programs on the basis of handicap and was amended in 1978 specifically to include alcoholism as a handicap.

The VA, represented by Jerrold J. Ganzfried of the solicitor general's office, attempted to avoid the question of whether alcoholism is a disease and argued that the court should decide the case on a narrower basis. He said the law prohibits judicial review of decisions made by the VA administrator, and one federal appeals court has agreed with that argument.

But Keith A. Teel, the Washington lawyer who represents the two veterans, charged that the VA policy on alcoholism violates the Rehabilitation Act, which applies to all federal agencies. Teel argued that the V.A. regulation categorizing alcoholism as willful misconduct "comes from the era of prohibition . . . {and is} reflective of archaic attitudes and laws."

In a brief filed in support of the veterans, the American Medical Association defined alcoholism as the "chronic, pathological use of alcohol" and said that it has been the "consensus in the medical profession" since 1956 "that such pathological use of alcohol is a disease."

The VA has interpreted "secondary alcoholism," in which the drinking is caused by another psychological disorder such as schizophrenia, as an involuntary disease for which benefits can be extended. But the agency considers "primary alcoholism," the far more common variety, in which the drinking itself is the major problem, to be the result of "willful misconduct."

Several justices questioned Ganzfried about that interpretation, asking how an active alcoholic could properly use the VA education benefits during the 10-year period following separation from the service.

Ganzfried insisted that such a veteran's alcoholism was considered to be "conduct" rather than a disease, and he added that the veteran would not be eligible for an extension unless he showed an actual physical disability.

Justice John Paul Stevens said that standard sounded "unrealistic . . . . {What if} he's drunk all the time?"

Ganzfried said the veteran would still need a "specific physical" complaint.

Chief Justice William H. Rehnquist asked, "Is being dead drunk a physical consequence that would entitle him to benefits?"

Ganzfried replied, "Being dead drunk on occasion does not prevent someone from pursuing education."

Justice Sandra Day O'Connor questioned whether Teel's view could not be interpreted to mean that anyone claiming alcohol or drug addiction could qualify for full disability benefits, with major implications for private industry as well.

Ganzfried said that such a policy would be "tantamount to paying that person for life to continue drinking or taking drugs." He added that a veteran has already made such a claim and that a lawsuit on the issue is pending before the 3rd U.S. Circuit Court of Appeals.

Teel conceded that such an interpretation is possible and said that Congress would have to deal with it.

The two veterans who brought the case are Eugene Traynor, 46, a supervisor in a New York City photo lab; and James P. McKelvey, 42, a Washington D.C. alcoholism counselor.

Teel said that "each began drinking as children," Traynor when he was 8 and McKelvey at 13. Court papers say that McKelvey was hospitalized 33 times for alcoholism before he quit drinking in 1975. Traynor was hospitalized for alcoholism five times between 1970 and Feb., 1974, when he joined Alcoholics Anonymous and stopped drinking.

Both men received honorable discharges from the Army in the late 1960s and had started but not used up their available education benefits when the 10-year time limit ran out. They have been joined in friend-of-the-court briefs by the Vietnam Veterans of America and the National Council on Alcoholism.

Groups providing treatment to alcoholics fear that a VA victory would encourage insurers to cut coverage for alcoholics and that employe assistance programs provided by many U.S. employers also could be cut back.

But supporters of the VA position argue that treatment programs are largely unsuccessful, that employers already are too limited in dealing with employes who use drugs or alcohol as an excuse for shoddy work, and that a VA loss could lead to a sharp escalation in the costs of benefits for veterans and government workers generally.

Traynor and McKelvey both won their cases at the district court level and were overturned by appeals courts. The court is expected to rule on the case by next July.