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Statement of the Indian Health Service Second Oversight Hearing on Contract Support Costs by Michael H. Trujillo, M.D., M.P.H., M.S.
Assistant Surgeon General Director, Indian Health Service.
Accompanied by: Michel E. Lincoln, Deputy Director; Douglas Black, Director, Office of Tribal Programs; Ron Demaray, Director, Self Determination Services; Carl Fitzpatrick, Director, Division of Financial Management
Indian Health Service
U.S. Department of Health and Human Services
Before the House Resources Committee
August 3, 1999
Mr. Chairman and Members of the Committee:
Good morning. I am Dr. Michael Trujillo, the Director of the Indian Health Service
(IHS). Today, I am accompanied by Mr. Michel E. Lincoln, Deputy Director, Indian Health
Service; Mr. Douglas Black, Director, Office of Tribal Programs; Mr. Ron Demaray,
Director, Self Determination Services; and Mr. Carl Fitzpatrick, Director, Division of
Financial Management. We again welcome the opportunity to testify on the issue of contract
support costs in the Indian Health Service. As we indicated in our testimony presented to
the Committee on February 24, we believe that contract support cost funding is critical to
the provision of quality health care by Indian tribal governments and other tribal
organizations contrActing
and compActing
under the Indian Self-Determination and Education
Assistance Act, Public Law 93-638 (ISDEA, P.L. 93-638). Since the February 24, 1999
testimony on contract support cost, we have continued to work with the authorizing and
appropriations Committees and Tribes to address the ever-growing contract support cost
funding challenge, discussed later in this testimony. In addressing this challenge, we
will collectively ensure that funding for contract support cost will not adversely affect
funding for other IHS programs, including critical services delivered to non-contrActing
and non-compActing
Tribes.
Congress appropriated an increase of $35 million for contract support costs in the
Fiscal Year 1999 Interior Appropriations with accompanying Committee report language
instructing the IHS that the increase should be "used
to address the inequity in the distribution of contract support cost funding in fiscal
year 1999.@ Further, the Congress directed the
IHS, in cooperation with the tribes, to develop a solution to the contract support cost
distribution inequity without the large infusion of additional funding for contract
support costs. We believe we are close to accomplishing both objectives.
Allocation of $35 million
Based on the Congressional guidance and results of extensive agency consultation with
Indian tribal governments, the Indian Health Service has adopted an allocation methodology
for the current distribution of the $35 million in the most equitable manner given the
total amount of the final negotiated CSC requests and availability of new funds. For
example, the new allocation method addresses all those CSC requests submitted by tribes
that have entered into P.L. 93-638 contract or compacts despite not receiving any contract
support cost funding for those assumptions. Under the new method, those tribes that have
the greatest overall contract support cost need for all programs administered through
self-determination contracts and compacts will receive the greatest proportion of new CSC
funding. We believe that this allocation methodology is responsive to concerns expressed
by the Congress that the Agency address the inequity in contract support funding levels of
tribes in the IHS system. To date, we have allocated over half of the $35 million increase
and we are able to fund, on average, 80% of the total contract support cost need
associated with IHS contracts and compacts. No tribe is being funded at less than 70% of
their overall contract support cost need.
At present, the IHS is engaged in negotiations with representatives of the Alaska
Tribal Consortium and the Southcentral Foundation over the amount of contract support
costs that will be allocated to these two organizations for their assumption of the Alaska
Native Medical Center (ANMC), which is the largest single takeover of an IHS program in
history. Any additional funding from the $35 million increase not allocated for the
assumption of the ANMC will be distributed in a manner that further reduces the disparity
in contract support costs funding levels.
Revision of IHS Contract Support Cost Policy
Since 1992 the IHS has had an established, written contract support cost (CSC) policy
that was developed and implemented, in consultation with tribes and tribal organizations.
This policy addresses many of the issues surrounding the determination of CSC needs
authorized under the ISDEA and the allocation of CSC funds appropriated by the Congress.
The first policy adopted in 1992 was subsequently revised in response to the 1994
amendments to the ISDEA.
As a part of the 1999 appropriations process the Congress expressed their concerns over
the inequity caused by existing IHS CSC distribution methodologies and directed the Agency
to propose a permanent acceptable solution to the CSC distribution inequity as a part of
the FY 2000 budget process. Within days of receiving this instruction from the Congress,
the IHS began the process to develop solutions to these CSC challenges. The fact that the
tribes, Congress and other stakeholders have differing views as to what constitutes
Aequity" was immediately apparent at
the start of our work. Consequently, the tribal and Agency representatives devoted
significant time, energy, and resources toward addressing the fundamental issues of equity
and developing solutions within the context of the different perspectives of all the key
stakeholders. With a strong commitment to be as responsive as possible to the concerns
expressed by tribes, the courts, and the Congress, the IHS incorporated the results of the
tribal-federal work into a major third revision of the current CSC policy. As an example,
the new allocation method being utilized to distribute the new FY 1999 CSC funds is
reflected in the Agency's proposed new draft CSC policy.
The IHS continues to consult and work closely with tribes, tribal organizations, and
their representatives in the further refinement of the proposed revised CSC policy. This
is consistent with the Administration and Congressional policy to support Indian self
determination through active consultation to ensure that all major policies, like the IHS
CSC policy, are based on the corner stone of the Indian Self-Determination Act. The IHS
and the Department are both firmly committed to providing meaningful consultation on this
issue. For example, we have made strides with Tribes to include authorizing language in
the Tribal Self Determination Amendments to the Indian Self Determination and Education
Assistance Act (P.L. 93-638) to explicitly state that contract support funding is subject
to appropriations and that funds are not to be reduced to other IHS programs and
activities.
The IHS has now nearly completed the development of a revised CSC policy that we
believe addresses the expectation of Congress as stated in the fiscal year 1999
appropriation Committee report. The proposed policy abandons the historic approach to the
Indian Self-Determination (ISD) Fund and the maintenance of a queue system in favor of a
pro-rata system whereby each eligible tribe with an ISD request receives a share of
any additional CSC funding proportionate to its overall CSC needs. Those with the
greatest unfunded CSC needs will receive largest share of any increase in available CSC
funding. Basic to this policy however, is the premise that a tribe
=s CSC funding will not be
reduced when that tribe is already receiving less than its identified CSC need. This is
consistent with the statutory provisions of Section 106 (b) of the ISDEA. We are also
committed to address contract support cost administratively, through the revision of our
agency CSC policy, which includes a provision to better reflect and reduce duplications in
contract support cost and tribal shares.
The new policy is much more comprehensive in addressing many of the more subtle facets
of CSC than prior policy issuances. This can be seen in our approach to improved
projections of CSC needs, a specific concern of the Congress; the tracking of CSC
shortfalls; and the integration of this information into the IHS budget formulation
process. We firmly believe that the proposed CSC policy takes advantage of all of the
tools available under the ISDEA to manage CSC in a responsible manner. The policy has been
drafted in such a way as to avoid any future litigation over CSC but this cannot be
guaranteed. This policy has not been adopted and codified as a Departmental regulation in
the Federal Register because both the IHS and BIA currently may not issue new CSC
regulations. However, Tribes have from time to time raised the possibility of
developing joint BIA/IHS regulations for CSC. The Agency needs to give serious
consideration to whether it is time to pursue congressional authorization of a negotiated
rulemaking process to adopt a final rule concerning CSC. The IHS would welcome the
opportunity to join with tribes, the BIA, and the OIG in such a process, if authorized by
the Congress.
Other Contract Support Cost Efforts.
Recently, the General Accounting Office (GAO) and the National Congress of American
Indians (NCAI) each completed an extensive study of CSC that have been forwarded to the
Congress. The IHS cooperated fully in the completion of both of these studies which we
believe accurately describe the importance of CSC to tribal governments. These independent studies have drawn many of the same conclusions that
have been reached by the IHS in the course of implementing the ISDEA provisions governing
CSC. We believe that both of these studies provide thoughtful insight into CSC issues. In
our view, the revised IHS CSC policy is consistent with most of the findings and
recommendations contained in these reports and we welcome the opportunity to work with
tribes, the BIA, and the Congress in reaching greater agreement amongst all of the varied
concerns and views.
Thank you once again for the opportunity to discuss contract support costs in the IHS.
We are now pleased to answer any questions that you may have.
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