SALEM, ORE. -- Donna Arneson is waiting to die. A rare disease has destroyed her liver, and unless she gets a new one, doctors give her six weeks to live.

With no health insurance or savings, the 36-year-old single mother assumed the state Medicaid program would pay for a transplant. Until recently, she would have been right.

But after a lengthy and emotional debate over how to ration Oregon's sparse health care funds, legislators here have decided that the state should no longer pay for most transplants. Instead, 1,500 pregnant women will receive regular prenatal exams with the same money that would have paid for about 30 organ transplants.

Choosing who should die did not come easily for the state of Oregon. The debate turned old friends into bitter enemies and left people on both sides in tears. But what has happened here will almost certainly reverberate across the country as the crippling cost of modern medicine forces officials to make choices they would rather avoid.

"We all hate it, but we can't walk away from this issue anymore," said Gov. Neil Goldschmidt. "It goes way beyond transplants. How can we spend every nickel in support of a few people when thousands never see a doctor or eat a decent meal?"

Still strapped by the recession of the early 1980s that was particularly severe in Oregon, state health officials decided last July that they would no longer finance costly bone marrow, pancreas, heart or liver transplants. At the time, few people noticed.

Then Coby Howard got sick. In November, doctors decided the 7-year-old needed a bone marrow transplant or leukemia would kill him. Howard's mother was unemployed, on welfare and had no hope of finding the $100,000 needed for the operation.

Coby Howard's final days were spent raising money for the operation he never had. The campaign collected $60,000 for Howard and the Fred Hutchinson Cancer Research Center in Seattle was prepared to go ahead with the operation. But by then the boy was too sick to have it.

By the time he died, last Dec. 2, Coby Howard had become a painful symbol of the nation's struggle to find a fair way to provide health care to the poor.

"I asked him to smile for the cameras, when not 30 minutes before he had been vomiting," his aunt, Susan McGee, told the legislative Emergency Board last week before it voted to uphold the state's policy. "I had to turn Coby Howard into a product so the public would buy him his life."

"This was government at its worst," said state Rep. Tom Mason, who, along with Mike Kopetski, another legislator, tried to have transplant funds restored. "To turn our backs on our neediest residents and watch them perform like circus animals before they die is a disgrace," Mason said.

To help fill the void, civic and church groups all over the state staged fund-raising drives for indigent residents who need help. Bake sales, leaflets and walkathons have become common.

Notoriety came too late for Coby Howard, but for Donna Arneson, the begging began in earnest last week. Donations have been brisk, but so far they have fallen short of the $140,000 cost of a liver transplant.

Many health insurers -- public and private -- do not cover the full cost of risky transplants. One of the underlying questions in the Oregon debate was why Medicaid recipients should be entitled to a service that many people with private health insurance could not receive. Even good private health insurance often fails to pay for the most expensive transplants, or those where success rates are low.

The demand for transplants has accelerated rapidly in the past few years, according to federal statistics, as new techniques, drugs and increasing sophistication have turned the once exotic form of surgery into an everyday procedure.

A critical factor in the enormous growth of transplants this decade has been the success of the drug cyclosporine in helping prevent the body from rejecting the foreign tissue.

The annual number of heart transplants in the United States has increased more than twentyfold since 1981, from 62 to more than 1,500 last year, according to the American Council on Transplantation. The number of liver transplants increased more than fortyfold from 26 in 1981 to 1,100.

Starting three or four years ago, Oregon, like many other states, began to receive significant increases in the number of requests for organ transplants. Last year the state Adult and Family Services Department estimated that it would pay for 19 transplants between 1985 and 1987 at a cost of $1.2 million. It projected those figures would nearly double in the following two years.

"I made the initial decision to cut the funding," said Freddye Webb-Petett, administrator of the department. "There are limits we have to face. In the past nobody had accepted that. So we have spent billions on health care without judging its value. We can no longer afford that way of life."

Webb-Petett said the choices were easy as long as they stayed on paper. But she keeps a picture of Coby Howard on her desk to remind her that her actions can have frightening consequences.

"We have to put a basic platform of care under those poor people who have none," she said. "When you think about it, that is the only fair way to spend this money. And I always go back and ask, 'What is the fairest thing to do?' "

"I know by now that no argument we will ever make will satisfy everyone," she said.

With the cost of most transplant operations averaging between $150,000 and $250,000, public and private providers alike have become concerned that they will not be able to afford to pay for them.

At the same time, the debate has intensified over how to provide health care for those who can't afford it. Over the past two years, Oregon adopted a series of changes that will provide increased access to basic medical care for about 24,000 low-income people each year. The total cost of the program will be $18.1 million.

The state will continue to pay for cornea and kidney transplants, which are among the least expensive such procedures and have good success rates. So far, no one has applied. Of the 19 Medicaid transplants -- bone marrow, heart, liver and pancreas -- paid for by Oregon between 1985 and now, 10 recipients have died. Since last summer, five requests have been refused.

Even for those who argue that tough choices must be made, sacrificing the lives of some people to save others has been painful.

"There are times when I have trouble looking people in the eye," said Dr. John Kitzhaber, a practicing physician who is president of the state Senate and a leader in the fight to shift resources to preventive health care. "But we have 37 million people in this country without access to any health care at all. They are the bottom tier of our society and they are the people we owe the most help.

"If we pay for transplants now, we will put a very small Bandaid on a very large iceberg," he continued. "But let's not kid ourselves. Many people will die in other ways."

Kitzhaber has been the point man for developing a policy to ration health care. While many in the state applaud his courage, others have accused him of walking away from patients who need help most.

His opponents have called him "Doctor Death" because he stood fast against attempts to restore transplant funds. He responds by pointing to statisticsshowing that 400,000 of Oregon's 2.6 million residents are not covered by health insurance. Of those, two-thirds are employed, according to the state Department of Human Resources.

"This abstract discussion is all very difficult for me to accept," said Kopetski. "We have gotten ourselves into a foolish debate. We simply have to find a way to provide decent medical care for the residents of this state. In America, that should be a right."

Kopetski sought restoration of transplant funds last week, though he initially voted last summer to spend the money on preventive care.

"We can do both," he said. "We have to."

For Evan Arneson, the 14-year-old son of Donna Arneson, who attended the hearings, the lofty ideals meant nothing.

"You all keep saying we can't play God with these choices," the Rev. Dale Galloway, the boy's minister, told the Emergency Board.

"Well, you're wrong. For Evan Arneson you people are God."