Early in 1987, President Reagan met with his Domestic Policy Council on whether to add "catastrophic illness" insurance to the Medicare program.

For Secretary of Health and Human Services Otis R. Bowen, the chief advocate of adding such insurance to Medicare, the outlook for presidential endorsement seemed bleak. As Gary Bauer, former domestic policy adviser to Reagan, recalls, most Cabinet members and other senior officials of the White House Domestic Policy Council opposed Bowen's plan.

But, Bauer related, "The president was a man who could be moved by personal stories. Secretary Bowen's wife had suffered years of cancer. It almost broke them. He shared that with the president. I could tell by watching the president it had a very emotional effect on him; that sort of thing was given more weight than was pure budget-crunching."

At the time, Reagan kept his counsel. But later he endorsed the Bowen plan.

The deliberations on one of the most controversial pieces of legislation in recent years -- "catastrophic" was enacted only to be repealed later because of protests against the premiums -- underscore the strengths and weaknesses of the Domestic Policy Council. Its recommendations carry no automatic weight, and can be ignored, but it can also provide a forum for ideas that will spark the imagination of a president.

The council under President Bush has dealt, for example, with clean air and drugs. When it discussed the death-penalty-for-drug-kingpins policy announced early this year, "the law and order guys carried the day," said Attorney General Dick Thornburgh, the council chairman when Bush is absent.

Major topics expected to come up in the next year or so, Thornburgh said, are how to provide health insurance to all Americans, medical malpractice reform, protection of wetlands, global warming, education for persons of Hispanic origin, and a possible anti-poverty strategy.

During the policy debates, council meetings generally run along these lines, according to sources, who asked not to be identified.

In a recent meeting on medical malpractice, Assistant Attorney General Stuart Gerson provided a long list of options. Roger Porter, assistant to the president for economic and domestic policy, and Michael Boskin, chairman of the Council of Economic Advisers, asked for detailed information on changes at the state level and the impact on insurance premiums. Gerson was asked to collect the data for a later session.

At another meeting, attended by the president, Thornburgh gave a briefing on white-collar crime and National Drug Policy Director William J. Bennett gave one on anti-drug efforts. The president, participating in "lively" fashion, made clear the anti-drug war is still a major White House priority.

The Domestic Policy Council traces its origins to President Nixon's Reorganization Plan No. 2 of 1970, though the structure has changed somewhat. Today the council, which handles general domestic and social issues, along with the Economic Policy Council and the National Security Council, is, as Bush put it last year, one of the "primary channels for advising the president on policy."

While the council takes a broad overview on issues, it is almost always working within the constraints of budget and political realities.

The president is chairman of the Domestic Policy Council, with Thornburgh designated as chairman pro tem. The president often misses sessions, since many are not decision meetings but more like "inter-agency think tank" gatherings where members focus their views and hear reports.

An official of one department described Thornburgh in the chair as a "good quick study, good at insisting that all be heard, crisp about moving things along, a good planner."

"I like the format," Thornburgh said in an interview. "I'm comfortable with it."

As governor of Pennsylvania, he ran similar state government councils. Before a meeting, he plows through the studies and position papers developed by the departments. "If I'm going to run a meeting I'd better know what's going on."

Aside from the attorney general, the council consists of the secretaries of Interior, Health and Human Services, Housing and Urban Development, Energy, Education, and Veterans Affairs; the administrator of the Environmental Protection Agency and the director the Office of Management and Budget. Vice President Quayle and White House Chief of Staff John Sununu are members ex-officio.

If a member cannot attend, an undersecretary or deputy or other senior official can stand in. Other Cabinet members can also attend as well as White House officials.

A decision to study a subject sometimes is specifically aimed at developing a set of policy options for the president. The end product, sometimes after many meetings, is a "decision memorandum" laying out viable options with brief pros and cons and a space for the president to check off his decision.

At the bottom, Bauer said, there is usually a summary of sentiment. "The Attorney General supports Option I; the Secretary of HHS supports Option 2. But this is not a vote, just an indication to the president of sentiment."

At other times, the council meets only to explore certain issues.

In the early stages of kicking ideas around or working toward a specific options paper for the president, sub-Cabinet "working groups" of assistant secretaries and agency heads do the initial work.

The council or its working groups often meet several times a week. For example, one official said, there recently have been meetings on crime and drugs, budget reform, minority education, malpractice and tort reform.

The council with Thornburgh in the chair recently discussed possible approaches to combat poverty but did not come up with a formal paper for the president. "The staff is still developing ideas and options -- eventually we'll give him a package," said Thornburgh.

The council uses staff from the White House Office of Cabinet Affairs, headed by Edith "Ede" Holiday, the former Treasury general counsel who is now assistant to the president and secretary to the Cabinet. Three professional staff members under Holiday are assigned to the Domestic Policy Council: Richard Porter, Daniel Heimbach and John Schall.

However, Holiday can ask departments and agencies to help the council with research, statistics and expert advice. Usually, the "lead department" does much of the research and drafts the initial options. But after the council chews them over, the list may be redrafted, with Holiday's staff coordinating the final effort, to reflect council deliberations.

"All Cabinet members see the final decision memorandum to see that it is accurate and that the positions are properly stated," said an official.

While the council provides a formal structure for reaching policy judgments, it is important to remember that in the Executive Branch it is the president who is supreme.