The statistics and broad generalities about the uninsured are daunting. But the sweep of large numbers and broad trends can numb the national health care reform debate. Any case for reform should also show how abstractions play out in the lives of real people.

The case of John McGann, who died of AIDS in June, is instructive. In December 1987, McGann learned that he had the disease. Soon after, he submitted his first health claims to his employer, H&H Music, a Houston-based music store chain. Mr. McCann also told H&H Music that he had AIDS. In July 1988, H&H informed its employees that as of August 1, 1988, it would make benefit changes under a new self-insured plan (H&H had formerly been insured) that included a cut in the maximum benefit for AIDS-related claims from $1 million to $5,000. Mr. McGann sued H&H for discrimination under the Employee Retirement Income Security Act, under which the company became regulated with it became self-insured. Last month, the 5th U.S. Circuit Court of appeals decided in favor of the employer. The judges ruled that ERISA does not mandate that employers provide any particular level of benefits.

Even if you grant, as the Appeals Court eventually did, that H&H had a right to do what it did, or if you agree as we do, that employers have sound business justification for limiting their health insurance responsibility for catastrophic illnesses such as AIDS, it's not hard to question whether the employer is legally culpable. There is a sense of unfairness and broken promises here that would disturb most Americans and outrage many, we think. To be sure, H&H's heavy-handed attempt to contain health insurance costs seem overly crude-and-cruel because it came so soon after Mr. McGann had filed his first claims.

But the plan changes were obviously made to assure the long-term financial viability of the benefit plan and perhaps of the firm itself. Those concerns cannot be dismissed in the health care reform debate. Nevertheless, the Appeals Court decision dramatized the need for new sources of catastrophic coverage by so sharply defining the limits of ERISA. Somehow the coverage gap into which Mr. McGann was unceremoniously tossed needs to be filled.

The best solution, it seems to us, is to spread such risks evenly across the whole society via federal legislation establishing a national health insurance system based on a modified version of the much-discussed "play or pay" option. Our view is that employers should be required to either provide a basic health insurance package, self-insured or traditional, or help fund a federal program which would provide such coverage. In addition, to cover catastrophic risks, employers and employees should be required to contribute to a separate national catastrophic health insurance fund to cover risks like AIDS.

The most costly risks would thus be pulled from the employer's basic pool, making noncatastrophic coverage far more affordable. At the same time, a separate catastrophic fund would make sure coverage is readily available without unfairly burdening any individual employer with a disproportionate number of catastrophic claims.

The national funds would be run by the federal government, financed by a combination of payroll and personal income taxes and perhaps administered locally by private health insurers. Strict cost standards should also be imposed to make sure the public's money isn't wasted.

We feel such a plan is the next logical step to take. Employees dumped out of their employer insurance plans because they are stricken with a catastrophic illness will end up being covered by Medicaid. Transferring catastrophic risks from the private to the public sector is acceptable, but only if the transfer is smooth and humane and it wasn't in Mr. McGann's case. And the cost burden must be fairly shared. Most Americans, we suspect, agree that every citizen should have an equal right to the best medical care. As a society, our task now is to agree on an equitable way to make this seemingly self-evident truth a reality.

You don't need, and in fact it would be a grave error, to eliminate the private insurance industry and replace it with a government run program. Such a drastic measure would not provide needed improvements, but instead would lead to costly regulations and higher taxes, limited consumer choice, long waiting room lines, and the government telling people what hospital to go to and what treatment to get. What we do need is a fair and equitable playing field so everyone can have access to affordable coverage. The federal government needs to:

*Prevent states from imposing costly mandated benefits that increase the cost of group health insurance for the small employer and from which large self-insured employers are exempt;

*Prohibit the enactment of state statutes that stand as obstacles to managed care systems that control costs and provide quality care;

*Help small business by extending to the self-employed the 100 percent tax deduction for health insurance;

*Target new tax subsidies to financially vulnerable groups; and

*Restore the promise of Medicaid for the poor and near poor.

Insurers need to change the way they do business. The federal government must allow states to enact insurance reforms that meet the unique needs of their citizens and that guarantee access, cover whole groups, guarantee renewability, limit premium increases, and limit pre-existing condition restrictions.

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