To the delight of consumers, Congress has greatly tightened the regulation of Medigap insurance, giving new protection to elderly Americans who rely on such policies to pay medical bills not fully covered by Medicare.

Despite this improvement, there's much more work for Congress to do on this nation's ailing health care system.The seriousness of the problem is beyond dispute. The number of elderly Americans is growing, all of them entitled to Medicare coverage regardless of need. Even higher payroll deductions, employer contributions and premiums don't come close to paying for the program, which requires large subsidies. On top of all that, an estimated 35 million Americans lack health insurance even though most of them are gainfully employed.

Fortunately, a couple of recent developments suggest that at least some partial solutions are within reach.

One of those developments is a new study from the highly respected Rand Corp. showing that the quality of health care for Medicare recipients continued to improve after the government stopped reimbursing hospitals whatever they charged and set fixed fees instead. So much for fears that Medicare's 33 million elderly and disabled beneficiaries would suffer as a result of the 1983 reforms. This finding should prompt a new exercise in belt-tightening.

That brings us to the 35 million Americans without health insurance.

Of these, three out of four are workers or dependents of workers. Of the uninsured workers, two out of three are employed by businesses with 35 or fewer employees.

This sad situation is prompting calls for Congress to adopt a national health system like Canada's. But this would take the United States even further down the road to socialism than it already is. Besides, Canadian patients often have to wait nine months or more for some surgical procedures. Who really wants to repeat that pattern in the United States?

Instead, the insurance industry is advancing a reform that sounds more promising. Under it, any small business employing 25 or fewer workers would be able to obtain health insurance for its workers, even those now considered uninsurable, at rates lower than those now prevailing.

The key to this proposal is the creation of mechanisms in each state allowing insurers to re-insure high risks and spread the costs broadly across the marketplace. Small businesses that present high health risks would be able to obtain benefit coverage at a rate no higher than 150 per cent of average market premiums for similar groups. Costs would be spread evenly across the marketplace.

Yes, plenty of objections can be raised. But the plan would relieve the pressure on Washington to devise some grandiose scheme involving more taxes and more federal red tape. And it would keep a substantial responsibility for health insurance in the private sector, which can provide coverage more efficiently and effectively than can be done by the bloated federal government with its massive, chronic budget deficit.

By all means, let's keep working both to improve the health insurance available to Americans and to contain its escalating costs. But let's also try to do the job without getting Washington more deeply involved in medicine than it already is.