Supreme Court tells IHS to pay its bills
Pauly Denetclaw
ICT
WASHINGTON — The latest victory of the Supreme Court case, San Carlos Apache Tribe v. Becerra, has been a long time coming for Lloyd Miller.
Miller has been deeply invested in strengthening the Indian Self-Determination Act since the 1980s. For more than a decade, he worked on the Hill to craft amendments to the act that later became law. In 2002, his work shifted to litigation and forcing the federal government to comply with the statutes.
“It's not just a 20-year battle over those three cases, but more like a 30-year battle to work with members of Congress to write the laws and then litigate,” Miller told ICT. “It's been a lot of fun.”
He continues to work with tribes to defend or implement the law nearly four decades later. Miller is a partner at Sonosky, Chambers, Sachse, Endreson & Perry, a law firm that only represents Native American tribes or tribes’ interest.
On June 6, the justices ruled 5 to 4 in favor of San Carlos Apache Tribe and Northern Arapaho. The question: should the Indian Health Service have to reimburse overhead costs, often referred to as contract-support costs, for billing insurance companies — like Medicare, Medicaid, and private insurers — at tribally-run health programs known colloquially as 638 hospitals? The answer is yes.
Insurance companies are referred to as third-party insurers in the case.
This ruling could bring an extra $2 billion to the health agency, though the federal government has been clear it doesn’t know how much it will actually cost to pay for contract-support costs.
While many tribal health advocates and Indigenous nations were celebrating this win, it also brought up more tangible questions. How will a deeply underfunded federal health agency pay these additional costs (especially when it relies on Congress)? Will it take from small nations that don’t run their own health programs, also known as direct-service facilities?
IHS directly operates these facilities in a variety of tribal communities across the country. Many direct-service tribes choose to receive their primary health directly from IHS because of the “lack of resources and infrastructure, rural locations, and belief that the United States upholds its treaty obligations by providing direct services,” according to the National Indian Health Board.
To put it into perspective: “Today, over sixty percent of the IHS appropriation is administered by tribes, primarily through self-determination contracts or self-governance compacts,” IHS states on its website using data from 2015 and 2020.
Nearly 80 percent of Indian health programs in the country are operated by tribes. In total, there are 1,008 Indian health programs — tribally-run, federally-run and urban — as of June 2023, according to data provided by Indian Health Service. Of those 792 are tribally-run either through contract, compact, or self-funded. Additionally, 140 are federally-run by IHS.
While the backbone of the ruling clarifies the Indian Self-Determination Act, the self-proclaimed textualists of the Supreme Court — Justices Brett Kavanaugh, Clarence Thomas, Samuel Alito, and Amy Coney Barrett — oddly didn’t address it in their dissent.
“Textualist means they follow the text of the statute and allow that to lead them to their decision void of any policy implications,” Derrick Beetso, law professor at Arizona State University, told ICT. “That's always been what they purport to do.”
Instead the dissenting opinion, which is an opinion written by justices who disagree with the majority, highlighted possible negative outcomes for the federal government that the court is not tasked with addressing like annual budget appropriations and the impact on tribes that depend on federally-run health programs.
“It seems they're really focused on a policy decision and trying to make sure that Congress in appropriating funds doesn't harm direct-service tribes and that the government doesn't have a bigger funding obligation than what was already agreed to through earlier agency decisions,” Beetso, Diné, said. “Whereas the majority looked at the statute, they looked at the plain language of the statute, the definition of what it means to be program income, the definition of what contract-support costs need to be supported, and it's those costs that go to support the purpose of the contract.”
Contract-support costs are like overhead costs for a business. It includes everything from the computers needed to calculate billing statements, the postage and envelopes to send those statements, paying the salary and benefits for employees, and even keeping the lights on at the health facility.
“You go to the grocery store, the overhead costs of paying the man or woman behind the counter, and hiring the person behind the counter, and paying workers' comp,” Miller said. “Buying the cash machine and insurance on the building and insurance on the inventory, too. All of these things you don't see… Their business license, their accountants, their tax accountants.”
“Everything costs money. It's hidden though,” Miller said.
In 1975, the Indian Self-Determination Act and Education Assistance Act gave tribal nations the option of operating their own health, public safety, or education programs. (This is not a complete list as there are many other kinds of programs that fall under this act.) The law was meant to increase the autonomy of tribal nations to meet the unique needs of their communities. It also came with federal funding.
The law has been so successful that over 50 percent of all federal Indian programs are now run by tribal nations, stated a 2015 report published by the American Indian Law Review.
Tribal governments would enter into contracts with IHS to run their own health programs. Upon completion of the contract, tribes would be reimbursed for the costs outlined in the contract. It was supposed to be that simple.
The federal government was more than willing to let nations run their own programs, but unwilling to pay the costs, despite it being mandated by treaties, statute (or the written law), and contract. Before 2012, contracts between IHS and tribal nations could not be enforced. Then, the Supreme Court ruled that tribal nations had to be reimbursed by IHS for contracts that were fulfilled including contract-support costs.
“Even if appropriations to the agency were insufficient to pay the contracts, the government still had to pay a contract with a tribe if a tribe performed the contract — just like any other contract,” Miller said.
The contracts stated that tribally-run health programs would be reimbursed for costs. However, IHS refused to include overhead costs for third-party insurance billing in the reimbursements.
IHS “didn’t honor the court decision,” Miller said. Thus, a new round of litigation began with the case that the Supreme Court just ruled on, San Carlos Apache Tribe v. Becerra.
Two concerns
The justices wrote about two worries this time around: annual budget appropriations and direct-service tribes.
The first concern can actually be addressed by a previous case.
In the aftermath of a 2012 Supreme Court case, Ramah Navajo Chapter v. Salazar, there was speculation that it would negatively impact IHS and Bureau of Indian Affairs budgets which would impact services for tribal nations, specifically direct-service tribes who don’t run their own health programs and rely solely on IHS.
This didn’t happen. IHS was appropriated more funding by Congress to pay contract-support costs for tribally-run health programs.
There was a hiccup with contract payouts in 2014 but this was reformed and corrected in 2015.
It’s also important to note that contract-support costs and funding for federally-run Indian health programs are completely separate. Funding cannot be transferred between the two.
“Unexpected higher payments on the contracts cannot legally impact the amount of money being spent on (direct) services or being appropriated for (direct) services,” Miller said. “There's an absolute wall between the two.”
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According to Miller, worries about negative consequences for direct service tribes from this decision are premature and only Congress is able to decide the outcomes during the annual appropriations process.
“I think House Appropriations chairman Tom Cole, out of Oklahoma, is doing a terrific job of trying to find additional money for the appropriations bill that funds the Indian Health Service for (fiscal year) 2025, but it's a longer term problem next year,” Miller said. They're also going to have to long-term figure out what to do. There is a major push in the Senate to make payment of these contracts automatic.”
This would look like mandatory funding for IHS. Currently, the health agency has to go through annual appropriations which means it's funded for a single fiscal year like most of the government. It’s considered discretionary funding.
Mandatory funding has to be passed into law by Congress. Social Security, Medicare, some veteran’s services, and income security programs make up the $2 billion in mandatory funding. Congress is mandated by law to fund these programs.
In the dissent, Miller saw the emerging of a double standard for tribal nations which worries him.
“There are many other cases, many other examples of (non-tribal) government contract cases, that have cost hundreds of millions, and billions of dollars,” Miller said. “Nobody in those cases ever talks about, ‘Oh my, it might cost the government.’ No, they read the contract. They read the relevant statutes… The cost for the government, the government always throws that up. They throw that up in every case that involves money, but the court traditionally doesn't pay any attention to it.”
An example of this was Winstar v. United States. In 1996, the Supreme Court ruled in favor of the plaintiff who was subsequently paid hundreds of millions of dollars by the federal government. Many other Winstar-related cases also recovered millions.
At the center of the case was the enforceability of contract agreements between companies like Winstar Corps. and the United States. The United States was trying to use sovereign immunity, a legal doctrine that says a government cannot be sued without its consent, to not honor the contracts it signed with Winstar Corps. In short, the United States breached its contract. So, Winstart Corps. sued the federal government.
The late justice Anthony Scalia wrote a concurring opinion to the case with Clarence Thomas joining.
“The Government may not simply repudiate its contractual obligations,” Scalia wrote.
Road to the Supreme Court
The first case to come down was Swinomish Indian Tribal Community v. Becerra. In 2021, the District of Columbia Court of Appeals ruled that the federal government didn’t have to reimburse the overhead costs to bill third-party insurance companies.
“The Act’s text and structure do not require payment of contract support costs when a tribe spends money received from sources other than Indian Health Service, like insurance providers,” Circuit Judge Justin Walker wrote in the appeal court’s decision.
The appeals court looked at the money generated from insurance companies as income rather than funding to support the execution of the contract.
“Interesting, not what we expected,” Miller said.
Meanwhile, Miller was the lead attorney on a different case involving San Carlos Apache, a nation located three hours west of Phoenix. The nation was also suing IHS to pay for overhead costs it incurred.
Northern Arapaho, a nation located in central Wyoming, brought a similar case with a slightly different reasoning against IHS. The case was Northern Arapaho Tribe v. Becerra.
(File photo: Vandana Ravikumar, Cronkite News)
Two different federal district court of appeals in the West agreed that IHS should shoulder the burden of the overhead costs. The Ninth Circuit Court of Appeals ruled in favor of San Carlos Apache and the Tenth Circuit Court of Appeals ruled in favor of Northern Arapaho.
“At that point, there was a conflict between two courts of appeals in the West and then the one court of appeals in the East,” Miller said. “The Supreme Court really had to resolve that and ruled in favor of the tribe. Absolutely, the government was underpaying the tribes.”
Impact of underpaying tribes
The overhead costs to run a health program, clinic or hospital is fixed. This includes the utilities, waste services, general and malpractice liability insurance, and so many other costs. All of this should have been paid by the federal government but it wasn’t. Nothing is free, forcing the tribally-run health program to cover the remaining costs.
“You actually take the money out of the program,” Miller said. “You hire fewer nurses, intake people, physician assistants, physicians. There's got to be a give somewhere, and that's what tribes generally would do.”
The way tribally-run hospitals operate vary from nation to nation but some would use reimbursements from third-party insurance like a savings account, putting it away to save for medical equipment, renovate buildings, or to build new clinics. Others would save it as a rainy day fund, according to Miller.
San Carlos Apache used the reimbursements to build a new garage to house the ambulances for their EMT program.
What is clear is reimbursements were funneled back into the tribe’s health program and fulfilling the contract signed with IHS.
Nations working together
San Carlos Apache and Northern Arapaho were two separate cases that were consolidated once it reached the Supreme Court. The court has the power to do this when cases have the same question.
Once the case was taken up by the Supreme Court last fall, both tribes began to work together.
“I just think it's positive that you had two tribal nations, each representing their own sovereign interests, but working collaboratively to protect those interests in the Supreme Court,” Morgan Saunders, staff attorney at the Native American Rights Fund, said.
The nations were granted a divided argument by the court, which is fairly uncommon. This meant an attorney from each of the tribes was able to give oral arguments at the Supreme Court. Miller represented San Carlos Apache and Northern Arapaho was represented by Adam Unikowsky, a partner at the Jenner & Block law firm.
Each was given 15 minutes. Oral arguments are an hour long with the plaintiff and respondent getting 30 minutes.
“The Supreme Court acknowledged the interests that each individual tribal nation had in bringing this case and making sure they got to say their individual pieces at the court,” Saunders said. “It was good to see that while also seeing the tribal nations really work together to get this important victory.”
For transparency: Derrick Beetso is chair of the IndiJ Public Media board, the parent company that owns ICT.
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