As one possible option for overhauling the nation's health-care system, the Health and Human Service Department's Social Security Advisory Council is looking at a plan to turn the government's role in the health insurance system on its head.

Currently, the government pays for routine bills of the elderly and many of the poor -- and there has been a movement to extend coverage to the whole population by creating a national health insurance system.

However, the plan under consideration, based on a concept favored by council Chairman Deborah Steelman, goes the opposite direction: For people under 65, the government would remove itself from the business of paying for routine health bills.

Instead, the government's role would be that of a "catastrophic" insurer, picking up a person's medical bills when they reached a yet-to-be-determined, although extremely high, figure. The individual would have to buy private insurance to cover expenses up to the point where the government's "catastrophic" payments start to kick in. The plan conceivably also could be used to cover the Medicare population and phase out the Medicare program as it now operates.

Although the plan is structured to cover every citizen, the council is studying it primarily because 31 million Americans have no health insurance at all, leading to strong pressure to provide them with protection under some overhaul of the nation's health system.

Council officials pointed out that no specific numbers have been put in place, but the plan would work something like this:

Each American would be expected to pay up to $1,000 a year of medical bills out of his or her pocket -- or about $3,000 for the average family. Premiums for private insurance are not included in those figures.

Individuals would be required to buy private insurance that would pay for costs above the $1,000 up to $25,000 a year, or about $40,000 for a family. The government would require the private insurance plans to cover the costs of doctors, hospitals, home care, preventive care and long-term nursing home care. The individual could pay for the insurance or -- as at present -- obtain it as a fringe benefit from his or her employer. There is no exact cost estimate for such premiums, but they would probably be several thousand dollars a year per family.

The government would pay for medical care costs above the annual $25,000/$40,000 level.

For low-income people, the government would subsidize the $1,000 in out-of-pocket costs and the premiums for buying the private insurance, so everyone who cannot afford health insurance would be covered.

The plan has several features that are considered likely to make it attractive to politicians and the public. It would not wipe out the private health insurance industry. By making people pay the $1,000 out of pocket, it would encourage them to be cost-conscious, prudent buyers of medical services and would also save on paperwork costs for small bills. And the $1,000 out-of-pocket threshold would protect most people from devastating financial burdens.

Ann LaBelle, executive director of the council, said the proposal would address one major fear that has emerged in numerous public opinion polls -- the fear of an open-ended illness with catastrophic costs, such as a prolonged nursing home stay.

She also emphasized that the proposal would provide a broader range of benfits than now available through Medicare and most commercial private health policies, since it would include long-term home care and long-term nursing home care, among other things.

Robert Ball, a former Social Security commissioner and a member of the council, said, "Just requiring people to buy private insurance does nothing to control costs, improve quality of care or prevent competition among insurance companies to try to insure those who are least likely to need care. I haven't made up my mind on the correct approach, but it will need to include expenditure controls and provisions to ensure that individuals or employers pay the same rates regardless of the risk of being sick. . . . "

He also cautioned that "requiring individuals to pay $1,000 would be a great hardship for millions of ordinary workers who probably wouldn't be eligible for any subsidies."

This plan is one of about a half-dozen under consideration by the council. Others include requiring employers to offer health insurance to all full-time employees, expanding Medicare from a progam for the aged to a program for all Americans, or requiring states to set up universal-coverage health care programs for residents, with costs paid in part by the federal government and in part by the state.