For thousands of elderly and disabled Oregonians, the struggle to hang onto their state-funded Medicaid "services" has become a desperate numbers game.

The services, which range from buying groceries to giving insulin shots, are organized around "survival priority levels," from 1 to 17. Like armor class in a role-playing game, the level indicates a client's degree of vulnerability. For example, a Level 17 client may need help walking to the grocery store; a Level 1 client cannot chew, swallow or even "evacuate" without assistance.

Facing a massive budget shortfall, administrators at the state Department of Human Services slashed approximately $10 million of services for 9,000 low-income clients. This month, DHS halted services for all clients in levels 15 through 17. Starting in April, it will cut loose all clients in levels 10 through 14.

That's grim news for Michael Rolfson, 58. Once a practicing psychologist who taught at Portland State and Marylhurst universities, he suffered a psychotic break in the late '80s, which sent him into a spiral of depressive psychosis and a series of strokes.

Today Rolfson is a Level 14. He can't climb stairs; he can't walk more than three or four steps; he needs help bathing; he is diabetic; his right arm shakes so much that he cannot inject himself with insulin. He has trouble juggling his 15 different medications.

The former college instructor with a double Ph.D from Berkeley has been reading a Tom Clancy novel since Thanksgiving but has only finished 156 pages so far.

Rolfson lives at the Macdonald Residence, an assisted-living facility located next to Satyricon in Old Town. The Macdonald's 30 full-time staffers help its 54 residents navigate the activities of daily life--cooking meals, bathing, getting dressed and keeping their pills straight.

Not only will the Medicaid cuts eliminate these services for Rolfson, but, because his Social Security check does not cover the cost of living at the Macdonald, the cuts will literally force him out the door.

"I'd be dead in six months or less," he says, his pale blue eyes peering at a visitor from beneath Santa Claus eyebrows. "That isn't alarmist. That's just fact. I'd go to the streets and I'd die. That's about as succinct as I can put it."

Altogether, state administrators reckon about 2,575 clients at Level 10-17 will be tossed out of care homes because of the budget crunch.

"There have never been cuts of this magnitude," says DHS administrator Cindy Hannum. "Oregon has been renowned for having one of the finest long-term care systems in the nation. Now we're dismantling that system. It's heartbreaking."

The impact is magnified by Medicaid's peculiar funding. For each $1 the state chops from the Medicaid budget, an additional $1.50 of federal money is lost. Thus the $10 million savings to the state's general fund actually represents $25 million in services eliminated.

Implementing these cuts will not be simple, however, because advocates have hit upon a last-ditch tactic--an obscure regulatory quirk known as "aid paid pending."

DHS rules allow clients to challenge their survival priority levels if they believe they are sicker than the state has given them credit for. As long as the challenge is pending, the state must keep paying for services.

Thousands of clients, including Rolfson, are now requesting fresh assessments, and hundreds more are appealing those assessments, creating a glut of paperwork. "That was our strategy," explains one advocate. "We had people fill out applications to clog the system."

DHS administrators plan to hire more hearings officers but concede sorting through the backlog may take months. Meanwhile, the state cannot kick its clients off services.

To stay at the Macdonald, Rolfson and roughly 30 other residents need to be reassessed at Level 9 or below. The Macdonald's assistant director, Miley Flowers, thinks Rolfson will make it. "His care has intensified since he first came here two years ago," she says. "He used to walk with a walker, and now he's really confined to a wheelchair."

But Flowers acknowledges that many other residents will not be able to squeeze into Level 9 and will have to leave the Macdonald. "They will go to the hotels, they will go to the SROs, they will go to the street," she says.