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The impending loss of $37 million in federal money means fewer child welfare services and less assistance for the developmentally disabled in Oklahoma.

An emergency rule change made to Medicaid policy in December declared state employees such as juvenile probation officers and child welfare workers can't be paid with federal Medicaid dollars because they are performing a state-level function. Because it was an emergency rule change, the issue wasn't argued in Congress.

According to the Centers for Medicare and Medicaid Services, the cuts are a result of the Federal Deficit Reduction Act of 2005. Medicaid hopes to cut $1.28 billion in spending by 2013.

The Department of Human Services will take the largest hit, losing $34 million for services it provides for child welfare and developmental disability services. The state Office of Juvenile Affairs would lose $3 million, which supplements case management of juvenile offenders.

About 5,000 Oklahomans receive services like direct care in their homes, said Sheree Powell, spokeswoman for the developmental disabilities division of DHS.

The agency employs about 300 case managers to make sure those services are provided and paid for, but relies on Medicaid to supplement salaries, she said. Case managers earn an average of $36,000 annually from state and federal funding.

Powell said DHS director Howard Hendrick is writing a letter protesting the rule change.

The Targeted Case Management program has been available to states since the early 1990s to help people in getting medical, educational and other necessary social services, but Medicaid officials argue states are now relying far too much on federal dollars to fund social services not directly tied to Medicaid.

According to the state Health Care Authority, Oklahoma spent $54 million on Targeted Case Management programs last year. Of that, the state paid $17 million and Medicaid supplied $37 million.

The change also will cut funding for Office of Juvenile Affairs employees who monitor delinquents.

Employees of the agency's juvenile service unit don't just monitor delinquents to make sure they're obeying the law, said Kim Sardis, the unit's administrator. Youth under watch are evaluated from home life to educational, psychological and medical needs. She said this monitoring is crucial to keeping young offenders from becoming criminals as adults.

"It's a more holistic approach to juvenile offenders,” Sardis said. "It's a way to look at what's causing their behavior to try to change it before they become adult offenders.”

Gene Christian, the agency's director, said he plans to urge the state's congressional delegation to lobby against the rule change. If the rule isn't overturned, the agency will seek more funding from the state.

"Targeted Case Management is a proven tool in our arsenal, and we are going to continue to provide that,” Christian said. "We are very upset this was done in the form of an emergency rule change, and there was no opportunity for debate.”

Christian said he also fears his agency will lose its status as a Medicaid provider under the new rule, which would jeopardize another $5 million in federal funding.

Medicaid funding accounts for a third of the agency's spending on mental health and substance abuse treatment for delinquents in community group homes. Of the 222 beds currently available, at least 74 could be lost.