A national medical society has bestowed its first "red tape" award on Blue Cross and Blue Shield of Colorado for denying Medicare benefits to an ailing 83-year-old woman, claiming she was already dead.

Mary K. Bare, a retired Denver teacher who died earlier this year, was denied Medicare benefits between January and July of 1988 by Colorado Blue Cross/Blue Shield, which processes the state's Medicare claims, because the insurance company had declared her dead, according to her doctor and the American Society of Internal Medicine.The Bare case was chosen for the new "red tape" award to spotlight the bureaucratic hassles patients face and because "it seemed the most egregious one that was reasonably recent," said Dr. Charles Duvall, president of the society.

Dr. Thomas Coleman, who was Bare's doctor, said his patient stopped receiving her Medicare reimbursement checks in January 1988, but continued to receive invoices that gave "deceased" as the reason the checks had stopped.

When Bare first called the Medicare office in Denver to report she was not dead, Medicare officials wanted to see her, Coleman said. Since she was too ill to leave her home, Medicare sent a woman to Bare's house to verify she was alive, he said.

However, even then her reimbursement checks were not restarted and she continued to receive monthly invoices saying she was dead.

Meanwhile, Coleman said he was getting computer-generated letters accusing him of filing claims for services to a dead patient.

Coleman said he and Bare repeatedly called the insurance company to straighten out the problem, but faced a seemingly insurmountable bureaucracy that either didn't care or was incapable of solving the problem.

"At first she couldn't believe this was happening to her and then she couldn't believe it couldn't be corrected," Coleman said.

Blue Cross/Blue Shield has insisted the problem was with the Health Care Financing Administration and Social Security Administration, who had declared Bare dead. However, Coleman said Bare was receiving her Social Security checks throughout that period without any problems.

Bob Hardy, a spokesman for the health care administration, declined to comment.

"This was an isolated situation which does not occur frequently," said Elisa Hamill, senior vice president for Blue Cross Colorado. "However, it is important to realize that the mechanism used is one required to ensure the Medicare benefits are safeguarded."

Coleman said he was finally able to reach a sympathetic Social Security official in June 1988 who straightened the Medicare problem out.

Bare began receiving her reimbursement checks in August 1988. She died in January of this year.

Coleman said the incident was particularly stressful for Bare, not only because she was ill, but because her husband was ill as well. Edward King Bare, 86, a retired hardware store owner, died last summer.

Coleman declined to disclose Bare's illness, saying it wasn't "relevant" to the case.

Duvall said the massive paperwork problems and bureaucratic hassles doctors and patients face with health insurers are not limited to Medicare, although Medicare "tends to be the worst."

"We're trying to raise the level of consciousness of regulators and legislators as to how frustrating these things can be," Duvall said. "It's getting a little crazy out there. Common sense has to prevail."