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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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