Published by Mary Ellen Anderson on July 18th, 2024

Among the major decisions it delivered in June, the United States Supreme Court handed down a ruling in a pair of cases on tribal healthcare costs. In a nutshell, the Supreme Court's decision requires that the Federal government provide additional funding to cover certain administrative costs incurred by Native American tribes that operate their own health-care programs.


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The Indian Self-Determination and Education Assistance Act (ISDA) enables an Indian tribe to enter into a “self-determination contract” with the Indian Health Service (IHS) to assume responsibility for administering the healthcare programs that IHS would otherwise operate for the tribe. When IHS administers such programs itself, it funds its operations through congressional appropriations and third-party insurance payments. Healthcare programs administered by a tribe under a self-determination contract have a parallel funding structure.

IHS must provide to the tribe the Secretarial amount, which “shall not be less” than the congressionally appropriated amount that IHS would have used to operate such programs absent the self-determination contract. Similar to IHS when it runs the healthcare programs, a contracting tribe can collect revenue from third-party payers like Medicare, Medicaid, and private insurers. These third-party funds are called “program income” and must be used by the tribe “to further the general purposes of the contract”.

The Secretarial amount and program income, however, do not place a contracting tribe on equal footing with IHS because the tribe must incur certain overhead and administrative expenses that IHS does not incur when it runs the healthcare programs. To address the funding shortfall, Congress amended ISDA by requiring IHS to pay the tribe “contract support costs” to cover such “reasonable costs for activities which must be carried on by a [tribe] as a contractor to ensure compliance with the terms of the [self-determination] contract.”

Contract support costs eligible for repayment include “direct program expenses for the operation of the Federal program” and “any additional administrative or . . . overhead expense incurred by the [tribe] in connection with the operation of the Federal program, function, service, or activity pursuant to the contract.” Such costs are limited, however, to those “directly attributable to” self-determination contracts, and no funds are available for “costs associated with any contract . . . entered into between [a tribe] and any entity other than [IHS].”

These cases involve self-determination contracts between IHS and two tribes—the San Carlos Apache Tribe and the Northern Arapaho Tribe. Both Tribes sued the Federal Government for breach of contract, contending that although they used the Secretarial amount and program income to operate the healthcare programs they assumed from IHS under their self-determination contracts, IHS failed to pay the contract support costs they incurred by providing healthcare services using program income. The Supreme Court held that ISDA requires IHS to pay the contract support costs that a tribe incurs when it collects and spends program income to further the functions, services, activities, and programs transferred to it from IHS in a self-determination contract.

More Investments in Healthcare

Ultimately, when tribes receive these reimbursements, it will free up more financial resources, which could potentially increase the scope and quality of services provided. With the assured reimbursement for administrative costs, tribes can work with benefits brokers to find more comprehensive and robust service packages, knowing that these costs will be covered.

Helping tribal governments to make the most of these reimbursements needs to be a top priority for anyone in the benefits industry. In addition, there will be an even greater need for accurate documentation and compliance with new and existing reimbursement procedures. It is vital that tribes have an experienced administrator to work with, to help ensure that all administrative expenses are recorded accurately, meticulously, and in a timely manner to meet IHS requirements.
 

Expanding Roles

By aligning their strategies and operations with these new requirements and opportunities, third-party benefits administrators and brokers can play a crucial role in enhancing the healthcare services provided to tribal communities.

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