Sometimes the system works -- even if in fits and starts and with long delays and disputes.

Although advocacy groups and the Social Security Administration are still squabbling over important details, SSA is about to put in place new eligibility rules for children with mental impairments or other disabilities seeking benefits under the federal Supplemental Security Income (SSI) welfare program.

As a result, billions of dollars in cash welfare payments and Medicaid benefits will go to tens of thousands of severely disabled low-income youngsters ineligible under previous rules.

Groups such as the District's Mental Health Law Project and Philadelphia's Community Legal Services have been pushing the government for seven years on the rules. The Philadelphia group won a Supreme Court victory on the general disability rules for children last February.

The children who will benefit suffer from major physical defects, including paralysis, and mental impairments such as autism, developmental delays and Down's syndrome.

Under the old rules, such children, although severely disabled, were judged ineligible because their specific mental or physical impairments did not appear on lists, called "listings," drafted by SSA as a guide to eligibility.

Under the SSI program, low-income, severely disabled people, including children, can receive up to $407 a month per person next year from the federal government, with state supplements available. People receiving SSI benefits automatically get Medicaid benefits as well in most states.

Currently, 330,000 children receive SSI benefits, half for mental impairments. Officials estimate that under the two major sets of rules changes, hundreds of thousands of denials dating to the early 1980s will be reconsidered, and up to 120,000 children will receive retroactive benefits.

In addition, under the new rules, officials estimate that in the future, about 12,000 more applicants each year will be approved than would have been under the old rules.

Over the next five years, the changes, including retroactive benefits, will cost the government $6 billion to $7 billion.

One set of rules changes, pushed by the Mental Health Law Project, a privately funded advocacy group, and numerous other organizations, involved a campaign started in 1984 to get SSA to modernize its children's mental impairment "listings," said group director Leonard Rubenstein.

Last week, Social Security Commissioner Gwendolyn S. King published new listings in the Federal Register, saying they "will assure that our decision-making process keeps pace with advances in medical knowledge."

Specifically and comprehensively listed for the first time, Rubenstein said, are drug and alcohol abuse disorders, autism, hyperactivity, developmental delays among children under age 1, and a variety of other conditions not adequately addressed before. New scientific knowledge was incorporated into the rules, he said, and the concept of criteria appropriate to a child's age was used much more widely.

The second set of rules, resulting from the Supreme Court's 7 to 2 ruling in Zebley v. Sullivan, involves all disabled children. The ruling resulted from a case brought in 1983 by Jonathan Stein, Richard Weishaupt and Thomas Sutton of Community Legal Services of Philadelphia.

The court ruled that if a child did not meet any specific mental or physical disability listing, the SSA should not simply rule out benefits, as it had been doing. The court said SSA should give the child an individualized functional assessment to determine whether the child's ability to function normally for its age was severely impaired. In some cases, a child has several disabilities, and while they do not specifically meet individual listings, the combination severely limits normal functioning.

The Zebley ruling is being implemented under interim rules for new applicants, but regulations defining how it will be carried out in reviewing previous denials are not in effect, though drafted. Social Security officials expect to publish them in January or February.

Two major disputes remain to be settled. Rubenstein and his allies want Social Security to automatically review every case denied mental impairment since at least 1987 or perhaps even earlier, a promise that he -- but not Social Security officials -- says was made in a Sept. 10, 1987, letter from then-Social Security Commissioner Dorcas R. Hardy. The letter said "these decisions will be redetermined under the revised criteria."

Rubenstein fears Social Security instead will merely write a letter to every family turned down asking whether it would like a review, to which many would never respond because they have moved or do not know how to handle such a review.

The dispute over the court decision requiring individualized assessments in all SSI children's disability cases also involves retroactivity. Stein, Sutton and Weishaupt have not reached agreement with the government on details of how to handle retroactive cases.

Some of these final disagreements could take months to settle, but the largest barriers have been cleared, making it inevitable that tens of thousands of the nation's most severely disabled and needy children will eventually get benefits.