Aligned with its dedication to furthering tribal rights and economic empowerment, NAFOA filed an amicus brief in the Ninth and Tenth Circuits in support of the San Carlos Apache and Northern Arapaho Tribes regarding contract support costs, how they are controlled, and the impact they have on Tribes’ ability to carry out transferred federal healthcare programs.
Representing tribal financial professionals who negotiate, report, and verify contract support costs daily, NAFOA is uniquely qualified to comment on the self-determination and self-governance contracts set out in the Indian Self-Determination and Education Assistance Act (ISDA). Knowing the impact of indirect support costs coming from ISDA healthcare services,
NAFOA submitted that “program income—i.e., payments collected from Medicare, Medicaid, and other health insurance sources, as ISDA contracts require—are paradigmatic contract support costs that must be reimbursed under the governing statutory framework.”
The brief outlines two key principles:
- ISDA contract support cost mandates are constrained by established federal contracting principles rigorous financial controls
- Program income expenditures satisfy Section 5326 because they are directly attributable to ISDA contracts.
Under ISDA, the federal government must enter into a self-determination contract with any requesting Tribe, which then allows the tribe to plan and administer health, education, economic, and social programs that would otherwise have been administered by a relevant federal agency. However, shortfalls in the contracting process occur when the “secretarial amount,” referred to as the funding amount the administering agency would have otherwise provided for the direct operation of the programs, fails to account for the full cost to the tribe providing the services. “This shortfall occurs in part because contracting Tribes incur certain direct and indirect contract support costs that the federally operated program is not required to pay or which are paid from other federal sources.” This creates a contract support cost issue, as indirect costs, such as overhead costs, are necessary to administer the contract and carry out the transferred program.
To determine these costs, a system governing the payment of indirect costs, both within ISDA and across federal contracting enterprises, has been created to ensure that indirect costs are carefully constrained and verified. Tribal finance department staff monitor contract support costs dollars within this carefully created set of rules to safeguard against the improper use of ISDA dollars. This system ensures that contract dollars do not subsidize expenditures beyond the remit of the contracted program.
The brief outlines the extensive rules that constrain and guarantee a Tribe’s indirect costs, how they are calculated and verified, and the ways in which program income expenditures are limited. Using examples of the types of indirect costs an ISDA contract might incur, it is demonstrated how unfunded indirect costs reduce the funding available to provide healthcare under ISDA contracts and the negative impact of those reductions.
The government argues that 25 U.S.C. § 5326 independently bars the government from paying such indirect costs. However, Sec 5326 was enacted to specifically reverse the court decision Ramah Navajo Chapter v. Lujan, 112 F.3d 1455 (10th Cir 1997), where a Tribe operated two distinct types of programs under different contracts. However, it has no bearing where no non-HIS-ISDA programs are involved, and thus, the scenario is not implicated in the cases here.
Unfortunately, Indian healthcare is chronically underfunded, and every dollar spent covering indirect costs is a dollar that isn’t spent on much-needed healthcare services to patients. When Congress enacted the contract support costs mandate for ISDA contracts, it had one goal: parity. “Funds made available to Tribes per their ISDA contracts—including the program income they generate—should be usable by them to provide the same amount of health care as when the contracted programs were operated by the Indian Health Service (IHS).” Reasonable and allowable overhead costs incurred to fund medical care with income generated from a Tribe’s ISDA healthcare program must be reimbursed.
For any other questions or concerns, please contact Susan Masten, Interim Executive Director, at susan@nafoa.org
