The Supreme Court ruled 5–4 on June 6 that the federal government will have to cover Indian tribes’ costs incurred in operating tribal health care programs.
U.S. Health and Human Services (HHS) Secretary Xavier Becerra was the petitioner in both cases. He appealed unfavorable rulings by lower courts.
The respondent, the San Carlos Apache Indian Tribe, is based in Arizona. The other respondent, the Northern Arapaho Tribe, is based in Wyoming.
The ruling means the U.S. government will have to pay for overhead costs related to health care that the tribes provide under a federal law intended to give Native Americans greater control.
“Aside from being inconsistent with the statute’s text, [the government’s] failure to cover contract support costs for healthcare funded by program income inflicts a penalty on tribes for opting in favor of greater self-determination,” the majority opinion states.
“Congress designed the statute to avoid such a counterproductive result.”
The chief justice’s opinion was joined by Justices Sonia Sotomayor, Elena Kagan, and Ketanji Brown Jackson, all liberal, and Justice Neil Gorsuch.
The federal statute that the court looked at was the Indian Self-Determination and Education Assistance Act (ISDA), which empowers tribes to administer their own health care programs. Tribes receive funding from the Indian Health Service (IHS), an agency within the HHS. The law requires IHS to reimburse tribes for some administrative expenses, which are called contract support costs.
Contract support costs are defined as “any overhead expense incurred by the tribal contractor in connection with the operation of the Federal program, function, service, or activity pursuant to the contract.”
Congress enacted ISDA in 1975 to promote “effective and meaningful participation by the Indian people in the planning, conduct, and administration” of federal programs and services for Native Americans, according to court documents.
ISDA allows eligible tribes to assume responsibility for operating federal programs administered by HHS or the U.S. Department of the Interior for the benefit of tribal members.
Tribes may take on that responsibility by entering into a “self-determination contract” with the relevant federal agency, in which case the tribe assumes responsibility for the programs and services spelled out in the contract. Certain tribes are allowed to enter into “self-governance compacts,” which function like self-determination contracts but generally provide those tribes with greater operational flexibility.
The IHS and the tribes entered into these contracts under which they receive federal funding to operate the program.
ISDA provides that the tribe is to receive the amount of appropriated funds that the government “would have otherwise provided for the operation of the programs or portions thereof for the period covered by the contract.” The law also requires the government to provide specified additional funds.
Contract support costs are added to the funding. They consist of reasonable costs for activities that the tribe must carry out but the government doesn’t normally provide.
Tribes collect revenue from third-party payors including Medicare and private insurers. ISDA states that such “program income” is to “be used by the tribal organization to further the general purposes of the contract.” In other words, tribes get to keep the insurance payments as long as they spend the funds on health care.
Tribes usually meet this requirement by using program income to provide additional services under the contracted program, just as IHS does when operating its programs.
The tribes say the IHS should pay contract support costs for the increased overhead expenses that tribes incur “in connection with services funded by the exact same program income from third parties that IHS uses when operating the same program.”
The case centered on whether the tribes are allowed to keep only enough of the funds for activities that IHS covers.
In 2021, a panel of the U.S. Court of Appeals for the District of Columbia Circuit held in a case involving Washington state’s Swinomish Indian Tribal Community that tribes were permitted to receive only contract support costs that cover IHS-funded activities.
However, a panel of the U.S. Court of Appeals for the Ninth Circuit found in 2022 that the San Carlos Apache Indian Tribe was entitled to payments covered by insurance. The circuit court found that the federal law was ambiguous, which under Indian law means the legal provisions must be interpreted in favor of the tribe.
In 2023, a panel of the U.S. Court of Appeals for the 10th Circuit arrived at the same conclusion in three decisions involving the Northern Arapahoe Tribe.
In the new decision, the Supreme Court affirmed those rulings.
It had been the position of HHS that it wasn’t responsible for the potentially expensive overhead costs associated with billing insurance companies, Medicare, and Medicaid.
Covering the expenses of all tribes operating health care programs could run to as much as $2 billion per year, HHS said.
Justice Brett Kavanaugh wrote in his dissenting opinion that for the past 30 years, the executive branch has interpreted the law “to require tribes to pay those overhead costs out of the third-party income collected from Medicare, Medicaid, and private insurers.”
Congress “never overturned” that practice, he added.
“But today, the Court upends that long-settled understanding and requires the Federal Government to furnish additional funding to the tribes for the costs of spending the third-party income,” he wrote.
“The extra federal money that the Court today green-lights does not come free,” the justice wrote.
The court ought to leave “those difficult appropriations decisions and tradeoffs to Congress and the President in the legislative process, and not now upset the settled legal understanding that has prevailed for the last 30 years.”
The dissenting opinion was joined by Justices Clarence Thomas, Samuel Alito, and Amy Coney Barrett.
