    [House Hearing, 106 Congress]
    [From the U.S. Government Publishing Office]

      THE CONTRACT SUPPORT COSTS WITHIN THE INDIAN HEALTH SERVICE ANNUAL
                                     BUDGET

    =======================================================================

                                    HEARING

                                   before the

                             COMMITTEE ON RESOURCES
                            HOUSE OF REPRESENTATIVES

                           ONE HUNDRED SIXTH CONGRESS

                                 FIRST SESSION

                                   __________

                       FEBRUARY 24, 1999, WASHINGTON, DC

                                   __________

                                Serial No. 106-9

                                   __________

               Printed for the use of the Committee on Resources

     Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                     house
                                       or
               Committee address: http://www.house.gov/resources

                                     ______

                         U.S. GOVERNMENT PRINTING OFFICE
    55-613                       WASHINGTON : 1999

                             COMMITTEE ON RESOURCES

                          DON YOUNG, Alaska, Chairman
    W.J. (BILLY) TAUZIN, Louisiana       GEORGE MILLER, California
    JAMES V. HANSEN, Utah                NICK J. RAHALL II, West Virginia
    JIM SAXTON, New Jersey               BRUCE F. VENTO, Minnesota
    ELTON GALLEGLY, California           DALE E. KILDEE, Michigan
    JOHN J. DUNCAN, Jr., Tennessee       PETER A. DeFAZIO, Oregon
    JOEL HEFLEY, Colorado                ENI F.H. FALEOMAVAEGA, American
    JOHN T. DOOLITTLE, California            Samoa
    WAYNE T. GILCHREST, Maryland         NEIL ABERCROMBIE, Hawaii
    KEN CALVERT, California              SOLOMON P. ORTIZ, Texas
    RICHARD W. POMBO, California         OWEN B. PICKETT, Virginia
    BARBARA CUBIN, Wyoming               FRANK PALLONE, Jr., New Jersey
    HELEN CHENOWETH, Idaho               CALVIN M. DOOLEY, California
    GEORGE P. RADANOVICH, California     CARLOS A. ROMERO-BARCELO, Puerto
    WALTER B. JONES, Jr., North              Rico
        Carolina                         ROBERT A. UNDERWOOD, Guam
    WILLIAM M. (MAC) THORNBERRY, Texas   PATRICK J. KENNEDY, Rhode Island
    CHRIS CANNON, Utah                   ADAM SMITH, Washington
    KEVIN BRADY, Texas                   WILLIAM D. DELAHUNT, Massachusetts
    JOHN PETERSON, Pennsylvania          CHRIS JOHN, Louisiana
    RICK HILL, Montana                   DONNA CHRISTIAN-CHRISTENSEN,
    BOB SCHAFFER, Colorado                   Virgin Islands
    JIM GIBBONS, Nevada                  RON KIND, Wisconsin
    MARK E. SOUDER, Indiana              JAY INSLEE, Washington
    GREG WALDEN, Oregon                  GRACE F. NAPOLITANO, California
    DON SHERWOOD, Pennsylvania           TOM UDALL, New Mexico
    ROBIN HAYES, North Carolina          MARK UDALL, Colorado
    MIKE SIMPSON, Idaho                  JOSEPH CROWLEY, New York
    THOMAS G. TANCREDO, Colorado

                         Lloyd A. Jones, Chief of Staff
                       Elizabeth Megginson, Chief Counsel
                  Christine Kennedy, Chief Clerk/Administrator
                    John Lawrence, Democratic Staff Director

                                C O N T E N T S

                                  ----------
                                                                       Page

    Hearing held February 24, 1999...................................     1

    Statement of Members:
        Hayworth, Hon. J.D., a Representative in Congress from the
          State of Arizona, prepared statement of....................    10
        Inslee, Hon. Jay, a Representative in Congress from the State
          of Washington, prepared statement of.......................    28
        Kildee, Hon. Dale E., a Representative in Congress from the
          State of Michigan..........................................     1
            Prepared statement of....................................     1
        Miller, Hon. George, a Representative in Congress from the
          State of Caliornia, prepared statement of..................     2
        Young, Hon. Don, a Representative in Congress from the State
          of Alaska..................................................     3
            Prepared statement of....................................     3

    Statement of Witnesses:
        Allen, Mr. W. Ron, President, National Congress of American
          Indians....................................................    16
            Prepared statement of....................................    34
            National Congress of American Indians, National Policy
              Workgroup on Contract Support Cost, First Interim
              Report.................................................    38
            National Congress of American Indians, National Policy
              Workgroup on Contract Support Cost, Second Interim
              Report.................................................    49
        Antone, Lt. Governor Cecil, Gila River Indian Community,
          Sacaton, Arizona...........................................    22
            Prepared statement of....................................    85
        Gover, Kevin, Assistant Secretary, Indian Affairs, U.S.
          Department of the Interior.................................     6
            Prepared statement of....................................    92
        Lincoln, Michel E., Deputy Director, Indian Health Service,
          Rockville, Maryland........................................     4
            Prepared statement of....................................    32
        Williams, Mr. Orie, Executive Vice President, Yukon Kuskokwim
          Health Corporation, Bethel, Alaska.........................    18
            Prepared statement of....................................    60
            Yukon-Kuskokwim Health Corporation.......................    66

    Additional material supplied:
        Council Annette Islands Reserve, Metlakatla Indian Community,
          prepared statement of......................................   100
        Miller, Lloyd B., Sonosky, Chambers, Sachse & Endreson.......   104
        Spratt, Hon. John M., Jr., a Representative in Congress from
          the State of South Carolina, prepared statement of.........    32

    HEARING ON THE CONTRACT SUPPORT COSTS WITHIN THE INDIAN HEALTH SERVICE
                                 ANNUAL BUDGET

                                  ----------

                          WEDNESDAY, FEBRUARY 24, 1999

                               House of Representatives
                                         Committee on Resources
                                                       Washington, D.C.
        The Committee met, pursuant to call, at 11 a.m., in Room
    1324, Longworth House Office Building, Honorable Don Young,
    Chairman of the Committee, presiding.
        Members present: Representatives Gallegly, Hayworth,
    Kildee, Faleomavaega, Ortiz, Smith, Christensen, and Inslee.
        Mr. Young. The Committee for Resources will come to order.
    The Committee is meeting here today to hear testimony on
    contract support costs within the Indian Health Service, the
    Bureau of Indian Affairs, annual budget.
        Under Rule 4 [g] of the Committee rules any oral opening
    statements at hearings are limited to the Chairman or the
    Ranking Minority Member. This will allow us to hear from our
    witness sooner and help members keep up their schedules.
    Therefore, if any members have any statements, they can include
    them in the hearing record under this unanimous consent.
        Now I recognize Mr. Kildee, for any statement he may have.

    STATEMENT OF HON. DALE E. KILDEE, A REPRESENTATIVE IN CONGRESS
                       FROM THE STATE OF MICHIGAN

        Mr. Kildee. Thank you, Mr. Chairman, and thank you for
    having this very, very important hearing on support costs. In
    1975 we passed the Indian Self-Determination Education
    Assistance Act. We have not always done right by providing the
    dollars that are needed to administer these programs in self
    determination, and I think it is important that we address this
    as the authorizing committee. And I would like to submit my
    statement and also the statement of the Ranking Member, Mr.
    Miller, for the record.
        [The prepared statement of Mr. Kildee follows:]

    Statement of Hon. Dale E. Kildee, a Representative in Congress from the
                               State of Michigan

        Mr. Chairman, today's hearing marks a fine moment in the
    106th Congress that allows us to take this opportunity to
    highlight the successes of native Americans and Alaska natives
    across the nation since the enactment of the Indian Self-
    Determination and Education Assistance Act of 1975.
        This hearing will also provide us an opportunity to learn
    of the impediments that have emerged from the implementation of
    the Federal policy promoting Indian self-determination, and to
    see what we can do to remove those impediments for the ultimate
    benefit of the tribes and the people they serve.
        Using the tools of self-determination contracting and self-
    governance compacting, tribes today in financial terms operate
    $840 million in Indian Health Service Programs, more than 40
    percent of the agency's entire budget. The results, as I am
    sure the Committee will hear today, have been staggering in
    terms of improved local autonomy and flexibility, streamlined
    services, expanded programs, better accessing of alternate
    resources, and improved education, employment, health status
    and welfare of the Indian communities served.
        None of this would have been possible without a true
    partnership between Congress and the tribes. That partnership
    is reflected not only in the many improvements we have made to
    the Self-Determination Act and self-governance laws over the
    years, but in the financial commitment we have shown, too, in
    the form of contract support costs, without contract support
    costs, we would be penalizing tribes, first by turning over
    underfunded programs to tribal administration, and then telling
    tribes they must further reduce those programs in order to
    cover the administrative costs of operating them.
        Mr. Chairman, Congress's commitment to pay contract support
    costs in the Indian Self-Determination Act is not only morally
    and legally correct, but it is necessary to fulfill the policy
    of self-determination. The Self-Determination Program is in
    crisis. Though some may say tribes are victims of their own
    courage and success, tribes are at this moment operating
    hundreds of millions of dollars in programs with inadequate
    contract support costs. We know the problem is not the contract
    support cost system, because the system has been exhaustively
    studied and scrutinized time, and time again. The problem is
    one of funding. While I support the President's FY 2000 budget
    proposal calling for a $35 million increase in funding for
    contract support costs in the Indian Health Service, I will
    request additional funding for contract support costs and
    funding for the Indian Self-Determination Fund.
        We, Members of Congress, made a commitment nearly a quarter
    century ago to support tribal self-sufficiency. Tribes have
    done their part in taking over responsibility for essential
    Federal programs serving their people. Now we must do our part
    to support them. Mr. Chairman, we must restore confidence in
    the self-determination system.
        I look forward to hearing today's testimony, and to working
    with the Committee and the House Interior Subcommittee to close
    the contract support gap that is threatening the future of the
    nation's Indian Self-Determination Policy.

        [The prepared statement of Mr. Miller follows:]

    Statement of Hon. George Miller, a Representative in Congress from the
                              State of California

        Mr. Chairman. We were both here in 1975 and helped pass
    Public Law 93-638, the Indian Self-Determination and Education
    Assistance Act allowing tribes to enter into contracts with the
    Bureau of Indian Affairs to run Federal programs previously
    provided by the BIA. The concept was simple--through government
    to government negotiations, Indian Tribes could take over
    specific programs and supply services directly to tribal
    members thereby replacing the total Federal involvement. Our
    belief was that as more and more tribes gained the expertise to
    administer Federal programs, tribal governments would assume
    greater control over Federal services authorized for Indian
    Tribes. We were correct, the desire and ability to enter into
    what became known as ``638 contracts'' grew and evolved to
    include Indian Health Service programs and further to include
    the ability to negotiate one ``self governance contract'' to
    administer most programs within the BIA or IHS.
        The problem, however has been inadequate funding of
    contract support costs which are necessary costs borne by an
    Indian Tribe to cover expenses which, when the program is
    provided by the Federal Government, are funded through other
    means. These costs can include personnel support, accounting,
    legal assistance and utilities. Congress and the courts agree
    that these funds are required, however inadequate funding has
    brought us to an almost crisis situation.
        Several factors have contributed to this problem including
    quick expansion of the number of 638 and self governance
    contracts negotiated, wide variations in the calculations of
    contract support costs, and appropriation levels too low to
    address the need. We must get a handle on how to fund these
    costs as failure to do so will greatly affect direct programs
    to American Indians.
        I don't think there are many in this room who would doubt
    the appropriateness and success of Indian Tribes running
    Federal programs, but the very success of this program could
    result in fewer contracts or severe caps placed on funding in
    the future. Legislation which I introduced last Congress to
    make permanent the self governance program within the IHS, was
    blocked in the Senate because of the issue of contract support
    costs. I think that was a mistake and I will reintroduce the
    legislation again. However, the Appropriators have made it
    clear over the last couple of years that if a solution isn't
    found soon, they will step in and attempt to curtail spending
    as they see fit.
        This morning we will hear from the Administration and
    Indian Tribes which are running successful health service
    programs. In addition the National Congress of American Indians
    will testify as to the working group they have assembled to
    come up with recommendations to address the problem. I look
    forward to all the testimony. We should not go back to the days
    where every American Indian had to come to the Federal
    Government to receive a service. I believe answers to this
    quandary should come from Indian country and not imposed upon
    tribes and I will work with all interested parties to come up
    with and implement viable solutions.

    STATEMENT OF HON. DON YOUNG, A REPRESENTATIVE IN CONGRESS FROM
                          THE STATE OF ALASKA

        Mr. Young. I thank the gentleman. I also have an opening
    statement--I would just especially like to welcome my Alaskans
    that are here today--and I'll submit it for the record also. We
    have Mr. J.D. Hayworth who has joined us today also. And so
    we'll continue with the witness list.
        [The prepared statement of Mr. Young. follows:]

      Statement of Hon. Don Young, a Representative in Congress from the
                                State of Alaska

        I would like to welcome everyone, especially my Alaskans,
    to this important hearing on contract support costs.
        Last year, the House and Senate Appropriations committees'
    were very concerned with the proposed $168 million dollars
    appropriated by the Administration for contract support costs
    for the Indian Health Service (INS) for fiscal year 1999. The
    proposed figure would have covered approximately 58 percent of
    contract support costs (across the board). This was
    unacceptable to me, the Committee on Resources and the House
    and Senate Interior Appropriations Committees. The
    Administration and Congress must remember that tribes are
    operating Federal programs and are carrying out Federal
    responsibilities when they operate self-determination
    contracts.
        I am pleased to see that the IHS has opted to retain the
    $35 million dollars that Chairman Regula added to contract
    support costs for FY 1999 in their FY 2000 budget. This
    increase coupled with the one year moratorium set on new
    contracts, will bring the percentage of coverage on contract
    support costs to 70 percent across the board.
        The Committee will also hear from the Bureau of Indian
    Affairs with regard to their system for contract support costs.
    The BIA pro-rates their indirect costs, however, funding for
    contract support costs does not include direct costs to tribes.
    Tribes believe that the direct costs paid by the IHS are in
    fact legitimate and should also be paid by the BIA as well. It
    is also my belief that the BIA and IHS should remain consistent
    and utilize similar, if not, identical systems to pay contract
    support costs.
        I want to remind everyone that under the Balanced Budget
    Act of 1977, we have strict caps on discretionary spending. In
    FY 2000, these caps will be lower than in FY 1999. Unless these
    caps are raised, that means that the Appropriations committee
    will have to cut back on programs rather than increasing or
    even level-funding them.
        Senator Stevens in the Senate has told me that while he
    strongly supports Indian Self-Determination, he and many of his
    colleagues have always believed that as more and more Native
    organizations began to run their own programs, that Congress
    would see concurrent downsizing in both the IHS and BIA. To
    some extent, we have seen that in BIA, but we have not seen
    that downsizing in IHS. So, this brings us to the hearing
    today.
        I will now recognize my Ranking Minority Member for his
    opening remarks.

        Mr. Young. The first panel is Mr. Michel E. Lincoln, deputy
    director of the Indian Health Service, Rockville, Maryland. Mr.
    Kevin Gover, assistant secretary of Indian Affairs, U.S.
    Department of Interior, Washington DC.
        Mr. Lincoln, you are up first.

    STATEMENT OF MICHEL E. LINCOLN, DEPUTY DIRECTOR, INDIAN HEALTH
                      SERVICE, ROCKVILLE, MARYLAND

        Mr. Lincoln. Thank you, Mr. Chairman. We appreciate the
    opportunity to be in front of the Committee today to talk about
    contract support costs. As a part of the President's Fiscal
    Year 2000 budget, we're very pleased to report to the Committee
    that the President has requested an additional increase for
    contract support costs of $35 million.
        On January 26th, the Committee, and through its chairman,
    has written Dr. Trujillo relative to a number of issues the
    Committee would like to entertain today and would like us to be
    responsive to. I would like to just briefly make comment on
    those issues and to let the Chairman know that we are prepared,
    though, to talk in detail about the various issues that are of
    concern to the Committee.
        The first issue dealt with contract support cost data. And
    I'd like the Committee to know that we've been working with the
    National Congress of American Indians. We've been working with
    what we call our Contract Support Cost Work Group in order to
    assist the agency and in order to share the information that
    has been developed, and in a very real way validate the data
    that has been developed relative to contract support costs. We
    believe we have the best data we've ever had and we'd be
    willing to share that with the Committee and submit that for
    the record.
        Mr. Chairman, the second issue that was raised discussed
    the Congressional intent that as more contracting was occurring
    that there would be, if not a one to one, there would be a
    similar reduction occur within the administration of the Indian
    Health Service. I'm here to let you know that since 1993 the
    Indian Health Service from an administration standpoint has had
    significant reductions.
        These reductions are associated with increased tribal
    contracting, but also are associated with various reductions in
    administrative dollars that have occurred as a result of
    appropriations Acts five and six years ago, and reductions
    associated, as we absorbed inflationary cost increases that
    aren't fully funded through the appropriations process.
        I would let you know that at our headquarters, as an
    example, there has been a 500 FTE reduction since 1993. At that
    time there was approximately 934 FTEs at the Indian Health
    Service headquarters operations throughout the country, and we
    are now at below 434.
        A similar kind of reduction has occurred at the Area
    Offices which is another administrative unit.
        And I have very detailed data in that regard. The actual
    increases in FTE for the Indian Health Service have occurred at
    the service level, those hospitals and those ambulatory care
    centers. And so on one hand we're seeing service FTEs increase
    and administrative FTEs go down.
        The third issue has to do with the various barriers dealing
    with downsizing. And to be quite frank with you, I think we've
    been able to overcome most of the barriers that have been
    placed in our pathway. And we would be prepared to work with
    the Committee and with the tribes as we talk about how better
    to right size the Indian Health Service from an administrative
    standpoint.
        Dr. Trujillo did convene a redesign committee a number of
    years and we continue to follow that redesign as the Indian
    Health Service changes its organizational structure.
        For a cost of administration programs, this is the most
    difficult set of questions that the Committee has raised to us.
    And I'm here today to let you know that we do not fully have
    the information available today that the Committee has
    requested. However, we do have information associated with the
    Indian Health Service program and what it costs us to
    administer these various health care programs.
        One of the themes, Mr. Chairman and Committee members, that
    you should be hearing from the Indian Health Service is that we
    believe any and all of these activities associated with the
    operation of the health care program should involve tribal
    governments, should involve Indian organizations, Indian
    people. As we move forward and plan for our health care system
    we will need to work with the Committee, we will need to work
    with the tribes in more completely addressing the fourth
    question raised by the Committee.
        In achieving the highest level of health care, we very much
    welcome this particular item. Basically we would like to talk
    about with the Committee, either at this hearing or at a later
    time when we can meet with your staff and provide a little more
    detail, as we have a number of ideas. We have a half a dozen
    ideas about the kind of changes that could be made in accessing
    third party funding streams and other revenue enhancements.
        And we, again, have some details to be shared with you,
    some access associated with Medicaid and Medicare
    reimbursements, and some barriers associated with the newly
    approved Children's Health Insurance Program, and some Title 19
    issues associated with Federal Medical Assistance payments to
    various organizations.
        Mr. Chairman, in terms of the number 6 of the issues
    surrounding non-contracting tribes, I would like the Committee
    to know that there have been a number of innovative first steps
    taken by tribes, and in many instances by the Indian Health
    Service in partnership with those tribes, that we would also be
    prepared to talk about in more detail.
        Noteworthy among these are activities, in Tucson, Arizona,
    of the Pascal Yaqui tribe, as it works with the State and with
    an HMO. And the successes associated with that HMO in
    guaranteeing a benefit package at a reasonable rate and, quite
    frankly, the challenges associated with continuing that
    particular benefits package through an HMO mechanism when the
    population is increasing so rapidly and costs are basically
    stagnant.
        There are also examples where tribal governments step
    forward directly. There are some health insurance demonstration
    projects that are occurring in the country, up in the Northwest
    specifically. President Allen will be testifying on the next
    panel, but his tribe, in particular, has taken quite an
    innovative approach associated with providing health care
    services to its members.
        Needless to say, the Indian Health Service project does not
    have authority to purchase a health insurance, if you will, as
    you and I would purchase, on behalf of the Indian people. We'd
    be looking for some statutory assistance to allow that option
    to be available to us. There are a number of other activities
    in Oklahoma with the Pawnee benefits package and with a couple
    of other examples that we would like to share.
        The seventh question dealt with funding needs. And
    especially, given the expected limitations for funding for
    contract support costs, we certainly appreciate the limitations
    and the constraints that the Congress and, quite frankly, the
    Administration, and tribal programs, and Indian health care
    programs find themselves in relative to funding. Generally,
    Indian health care programs are underfunded when we are
    compared to non-Indian programs.
        What we have done as we've looked at contract support costs
    in developing this study, and working hand-in-hand with tribes
    and national Indian organizations, is that I think it's through
    that partnership through that working together in the budget
    process and on contract support costs, in particular, that the
    Administration has come forward with its $35 million request.
        We believe the need in FY 1999, as our written testimony
    states, is approximately $52 million. That need will rise to
    approximately $100 million in round numbers as we move into
    Fiscal Year 2000. We're certainly looking forward to working
    with the Committee, working with the Congress, especially in
    terms of also our appropriations committees. And equally as
    important, working in partnership with tribes in the national
    Indian organizations as we pursue the very important serious
    issues surrounding contract support costs.
        Mr. Chairman, I would like to acknowledge that Mr. Doug
    Black, who is our director of our Office of Tribal Programs is
    with me at the table. But also Ms. Paula Williams, who is our
    director of the Office of Tribal Self Governance, is seated
    behind me. And if you would allow me, they are the experts in
    this area and I would like to depend on them for the very
    detailed answers to the questions that you may ask of us. I
    thank you for the time and I appreciate being here.
        [The prepared statement of Mr. Lincoln may be found at the
    end of the hearing.]
        Mr. Hayworth. [presiding] Mr. Lincoln we thank you for the
    testimony. And there is my good friend from American Samoa, Mr.
    Faleomavaega. Welcome to all those who serve on this Committee,
    including my good friend from Michigan and my friend from New
    Jersey. I want to thank you for bringing your associates this
    morning, and we will have questions later. Now it's my honor to
    introduce the assistant secretary for Indian Affairs, for the
    U.S. Department of the Interior, Mr. Kevin Gover. Mr. Gover,
    you are recognized.

    STATEMENT OF KEVIN GOVER, ASSISTANT SECRETARY, INDIAN AFFAIRS,
                    U.S. DEPARTMENT OF THE INTERIOR

        Mr. Gover. Thank you Mr. Chairman. I have with me the
    deputy commissioner of the Bureau of Indian Affairs, Hilda
    Manual, and to my right, Deborah Maddox, who is the director of
    the Office of Tribal Services. And they will be responding if
    the Committee has any difficult questions.
        We prepared a series of charts in response to the inquiries
    made by the Chairman. And the first of which is on the stand
    right now. [Chart]
        What that shows right now is that since 1981 the Bureau has
    gone from nearly 17,000 employees to less than 10,000. Much of
    that is the result of tribal contracting. Some of the decrease
    is attributable to various budget cuts and the transfer of the
    Office of Trust Fund Management out of the Bureau. But most of
    it in fact is due to the increase in tribal contracting over
    the years.
        You will also note, at the end of that chart, a slight
    climb in our FTEs for the year 2000. The reason for that is two
    fold. One, we will be adding a number of additional police
    officers over the next year in accordance with the President's
    law enforcement initiative. The other reason is that right now
    we are subject to a moratorium on further expanded self-
    determination contracting and self-governance compacting.
        So the bottom line is, to those who wish to see the Bureau
    of Indian Affairs shrink, we must be authorized to go back to
    making those contracts and compacts with the tribes.
        The second chart, Mr. Chairman, shows what we project our
    reductions will be. Now, there are certain assumptions behind
    that. We think we would lose a little less than 400 employees
    over the next few years, based on what has been happening over
    the past few years in terms of contracting.
        That assumes a couple of things. One is that basically
    we'll be dealing with a flat budget. One of the things that we
    know is that in the years where our funding increases, tribal
    contracting increases. And that is only to be expected as the
    programs become more attractive. So, again, one of the ironies
    about the Bureau of Indian Affairs, the more money you give us,
    the smaller our agency becomes due to the tribal contracting.
        The next graph, Mr. Chairman, reflects total BIA funding,
    the total amount contracted by the tribes, and the total amount
    compacted through self-governance compacts. What that shows,
    therefore, is that fully well more than half of our funds
    actually go to the tribes in the form of contracts, compacts,
    and grants to operate BIA schools. Again, we would like to see
    those first and second bars go up further so that the tribes
    are running even more of our program. And contract support and
    funding are primary impediments to increased compacting and
    contracting.
        And this is the chart that shows why it has become
    difficult for us to expand the amount of contracting and
    compacting we're doing. As you can see, between 1995 and 1997,
    we lost a lot of ground in terms of contract support payments
    to the tribes, going from funding around 92 percent of what the
    statute says we owe to the tribes to only 77 percent in FY '97.
        Now, we have slowly been able to increase those amounts.
    And were our budget request for the year 2000 to be granted,
    that would only bring us back to around 84 percent. So we're
    still far short of the mark of 100 percent.
        Let me add that we too have been working with the National
    Congress of American Indians on trying to come up with a
    solution to this problem. You may also know, Mr. Chairman, that
    we were subject to litigation in which a Federal court
    determined that we were liable to the tribes for the short fall
    in contract support funding, notwithstanding the fact that
    we've spent every dollar that the Congress had given us on
    contract support funding. The Court found that we were still
    legally responsible for the rest.
        Let me mention some of the ideas that we have been talking
    with the tribes about and considering internally to deal with
    this issue. For one thing, we have now been held liable by a
    court for contract support to support contracts that have been
    let by other agencies. Now that seems to us to be questionable
    interpretation of the statute. Nevertheless, it's one that the
    courts have made. But it seems much more appropriate, given the
    need in Indian Country and given the continuing shrinking
    purchasing power of both BIA and IHS dollars, that issue be
    revisited and that other agencies who contract with the tribes
    be asked to contribute to contract support.
        Second, we would propose to continue distributing contract
    support on a pro-rata basis. In other words, if we're only able
    to fund only 84 percent, say, of the contract support needs
    nationally, that we give 84 percent to each tribe, as opposed
    to all to some and less to others.
        Third, we are considering the tribes' position that we
    should be paying certain direct costs that are associated with
    contracting that we do not currently pay. I think the tribes
    have made a persuasive case that those are appropriate costs of
    contracting, and we will continue to work with them to decide
    whether or not we'll be able to do that.
        And, finally, we would like to improve our system for
    anticipating what our contract support costs are going to be in
    the future. Right now we have sort of an informal system where
    we ask the tribes to guess in advance whether or not they are
    going to be contracting with us so that we can anticipate those
    costs and ask for the appropriate amount.
        However, under the statute, they only have to give us 90
    days notice. So if a tribe decides that it wants to exercise
    its right, we have no way to anticipate that in a way that
    allows us to make it a part of our budget request. And that too
    is contributing to our failure to ask regularly for a
    sufficient amount of contract support funding.
        Mr. Chairman, my time is up and we'd be happy to entertain
    any questions that the Committee may have.
        Mr. Hayworth. Mr. Gover, we thank you very much for that
    and thank the panel for its testimony. And also, Mr. Gover, I'd
    say thank you for bringing your associates for any difficult
    questions that we might have.
        [The prepared statement of Mr. Gover may be found at the
    end of the hearing.]
        Mr. Hayworth. And using the prerogative as acting chairman,
    I just want to welcome my good friend back to the Congress from
    Washington state, Mr. Inslee, who is here. Good to see you. And
    in the prerogative of the Chair right now, I won't ask a
    difficult question here, but just simply for both Messieurs
    Lincoln and Gover. First Mr. Lincoln.
        If you could offer to us what you believe to be the most
    essential aspect to dealing with this challenge of contract
    support funding and, in a perfect world, the solution you would
    like to see fashioned. A chance really to amplify your
    statement. Let me give that to you right now.
        What do you believe, in fairly short order, we in the
    Congress need to do to deal with this challenge? The very most
    important challenge we face and the solution that would be
    yours, if we were freed from some of these strictures we find
    ourselves under?
        Mr. Lincoln. Mr. Chairman, I'm going to say something that
    sounds very simple, that has two pieces to it, that is
    incredibly complex, but I think both are necessary. First of
    all, any solution that is crafted dealing with contract support
    costs, dealing with Indian health care issues, dealing with
    tribal solvency, and the broad set of issues that we deal with,
    both the Congress and the Administration, in this case the
    Indian Health Service, just absolutely requires working hand-
    in-hand at the beginning with tribal Governments. And that can
    be accomplished. That is something, though, that is a mandatory
    requirement in our mind, in the perfect world, that would be
    part of the response.
        As that relates specifically to contract support costs. I
    believe that issue confronting us today really is one of
    funding, but it's one of funding that is as a result of the
    statutes and our interpretation of those statutes, if you will,
    the law of the land.
        In the Indian Self-Determination Education Assistance Act
    there are requirements that the Congress has described, we
    think, in clear terms, regarding what the responsibility of the
    Federal Government is to tribal governments when they take over
    their health care programs, in our instance. And we believe one
    of those requirements, one of those essential pieces is the
    acknowledgement of the need and the legitimacy of contract
    support costs.
        Furthermore, from our perspective, it is our belief that
    the contract support costs, as we have reviewed them, and as we
    have worked with tribal organizations, our own Contract Support
    Costs Work Group, the NCAI, and others who will work with us,
    those costs are not unreasonable as we look at them and as we
    compare them to administrative cost rates that exist elsewhere
    in this country with universities or with other organizations.
        The answer that we need more resources is a very simple
    answer, and it's incredibly complex and difficult to do for all
    of us.
        Mr. Hayworth. And of course it's something that it's
    important to get into the record because from your perspective
    and ours, it cannot be overstated. Mr. Gover, in preparation
    for your associates and the quote, unquote, ``difficult
    questions,'' let me simply mention to both you gentlemen on the
    panel that the more difficult questions we will offer to you,
    we have a list prepared by the Committee staffs.
        And if you could get back to us in writing within 10 days
    of this hearing date, we'd very much appreciate it, so that it
    will give you a chance to go back and ponder some of the more
    difficult answers.
        But, Mr. Assistant Secretary, again, I'd be interested in
    your notion of the compelling need and the best remedy at this
    juncture.
        Mr. Gover. I think there are three things that really need
    to be done. First of all, we need to develop with the tribes a
    system for knowing as far in advance as we possibly can what
    programs they intend to contract so that we can do proper
    calculations and make appropriate requests for contract support
    funding.
        Second, each agency needs to pay its own contract support
    costs. The Bureau budget simply can't bear the strain of all
    tribal contracting with all other agencies in the government.
    And, third, we need 100 percent funding. We need to ramp up
    toward 100 percent funding of the contract support costs
    obligation that we've made to the tribes.
        Mr. Hayworth. Mr. Assistant Secretary, I thank you very
    much and thank the panel. It may be somewhat unorthodox to my
    friend the Ranking Member and my co-chair of the Native
    American Caucus, but in closing I have my opening statement
    that I will submit for the record, and without objection, make
    that a part of the record.
        [The prepared statement of Mr. Hayworth follows:]

    Statement of Hon. J.D. Hayworth, a Representative in Congress from the
                                State of Arizona

        Chairman Young, I appreciate the opportunity to participate
    in this important hearing on Contract Support Cost (CSC)
    funding. It is indeed a great honor to sit on the dais of this
    Committee, on which I formerly served. I would be remiss if I
    didn't personally thank you for your outstanding work on
    Contract Support Cost funding in the 105th Congress. During the
    waning days of the last Congress, I was pleased to work with
    you and others to convince our leadership to cede to our
    position on this issue. As part of that agreement, you
    expressed your intent to hold hearings on Contract Support Cost
    funding. I am pleased to see that you are taking this important
    first step.
        Mr. Chairman, if you would allow me to indulge for one
    moment, I would also like to personally thank you for inviting
    to testify Lieutenant Governor Cecil Antone of the Gila River
    Indian Community, one of the eight tribes that I represent in
    Congress. I believe you will find Lieutenant Governor Antone's
    testimony especially compelling because although the tribe
    supported the eventual compromise language that was included in
    the Omnibus Appropriations bill, it actually lost money because
    of the compromise. However, its support for the compromise
    language was based on belief that the entire system must be
    fixed.
        Let me take a moment to explain Gila River's predicament.
    In fiscal year 1999, Gila River was slated to receive their $4
    million Contract Support Cost request because they had
    patiently waited for more than four years and were at the front
    of the Indian Self-Determination, or ISD, queue. As you know,
    Mr. Chairman, the Administration did not include any new
    funding for the ISD queue. Thankfully, Congress provided an
    additional $35 million for the queue and Gila River could have
    received their $4 million contract. However, the tribe was
    willing to lose $1.2 million in 1999 to fix the process and
    ensure that all tribes are receiving at least 70 percent of
    their fiscal year 1999 request. This is a far cry from the 100
    percent promised to the tribe, but Gila River came to the
    conclusion that other tribes that are more economically-
    challenged should not be penalized by a system that has gone
    awry.
        Sovereign Indian nations face unique health care challenges
    that make it imperative that they receive the necessary amount
    of funding. Native Americans suffer from diabetes at a higher
    rate than any other segment of our population. Some of the
    cumulative effects of diabetes include gum disease and
    amputation. Even with these added health care challenges,
    Native Americans receive far less than the average American in
    health care dollars. We need to end this, and fully-funding
    Contract Support Costs is an important first step.
        Mr. Chairman, I have one final point to make. There is a
    serious dispute between the various government agencies and
    Congress about how much funding is actually needed for Contract
    Support Costs. The Indian Health Service has one set of
    numbers, Office of Management and Budget has another, and
    Congress and other groups have still other numbers. I believe
    that Congress needs to conduct an audit in order to get
    accurate data for Contract Support Cost funding. I found this
    to be one of the most frustrating aspects of the entire process
    last year. We must have accurate data in order to fully and
    properly fund tribes for Contract Support Costs.
        Mr. Chairman, you and I represent large Native Alaskan and
    Native American populations. We must work now to solve the
    problems of Contract Support Cost funding before more tribes
    lose crucial funding. I look forward to working with you and
    all the members of this Committee to solve this problem. I also
    look forward to working with Congressman Kildee, my fellow
    cochair of the Native American Caucus, and other members of the
    caucus, in rectifying the problems associated with Contract
    Support Cost funding.
        Mr. Chainnan, thanks again for the opportunity to be here
    today.

        Mr. Hayworth. And now let me turn to my good friend and
    colleague from Michigan, Mr. Kildee.
        Mr. Kildee. Thank you Chairman J.D. It's always a pleasure
    working with you on Indian matters. J.D. and I don't agree on a
    lot of other issues, but we do agree on Indian matters and our
    Native American Caucus, I think, has been effective. I enjoy
    working together on that.
        Mr. Lincoln, I notice that the President's FY 2000 budget
    request for IHS did not propose any funding for the ISD Fund.
    Did IHS recommend the Administration funding for ISD?
        Mr. Lincoln. Mr. Chairman, as the budget was being
    formulated, and working with tribes, the tribes in the Indian
    Health Service did agree upon an initial request for contract
    support costs. That initial request was approximately $150
    million. As we were working with the tribes 9, 12 months ago,
    as the budget progressed through the process, the Secretary
    indeed supported that budget request.
        And I think, legitimately, because of constrained
    resources, we had to pare back the request both at the
    Department level and at our level. Our last request that went
    forward, supported by the Secretary, by Dr. Shalala, was a
    request of approximately $100 million for contract support
    costs that did include both short fall and ISD funding.
        Mr. Kildee. And what happened to that $100 million request?
        Mr. Lincoln. I believe because of limited resources that
    that $100 million amount was reduced to the $35 million that
    now appears in the President's budget. That reduction was made
    at the Office of Management and Budget level. We had many
    discussions with them. We believe there were sufficient
    constraints in the available resources that that was one of the
    casualties of that negotiation.
        Mr. Kildee. At $35 million, what percent of the tribes'
    needs or requests would be funded?
        Mr. Lincoln. Of the tribes that are basically on what we
    call our ``queue,'' our list of pending requests, as we
    distribute the $35 million that we received for this fiscal
    year, for FY 1999, that will essentially fund all tribes no
    less than 70 percent of their contract support costs needs. The
    lowest will be 70 percent, the average will be somewhere right
    around 80 percent.
        With this additional $35 million, I need Mr. Black,
    actually, to respond to that. There will be additional costs
    associated with contract support costs in the year 2000 and I
    do not know that off the top of my head.
        Mr. Black. Actually, with regard to the $35 million, what
    we would do, I believe, if that was appropriated, is use part
    of that money to fund any new contracts or compacts, assuming
    the moratorium on 638 would be lifted. The remainder we would
    use to raise that 80 percent level up and it would probably be
    somewhere between 80 and 90 percent level of need funded for
    the tribes in the system.
        Mr. Kildee. You know, Mr. Lincoln and Mr. Gover both, you
    are both very good people. I know you individually and your
    hearts are really set on doing what's just. But I can recall
    back in 1981 when President Reagan became President, and he
    appointed Cap Weinberger as Secretary of Defense, and Dave
    Stockman as his Director of OMB. Now, Dave Stockman went down
    to all the other agencies and slapped them around and told them
    to reduce the amount of their request, and Dave Stockman
    usually won.
        But when he went to Cap Weinberger, Cap Weinberger told him
    to go to heck. He really became an advocate, a strong
    successful advocate of the Department of Defense. And you two,
    I know you are good advocates, but I just encourage you to
    become just get a little meaner in there when the OMB comes to
    you.
        Dave Stockman ran the government back in 1981. Except he
    couldn't run Cap Weinberger because Weinberger would slap him
    in the face and say, ``Go back to your office, kid, we're going
    to get this amount of money for defense.''
        And I think that with all my high regard, and I do have it
    for both of you, I think you really have to look back and take
    a page out of Cap Weinberger's book and say, ``We're going to
    tell OMB to go the heck and we're going to demand more,'' and
    become a strong, successful advocate for these programs.
        And I know you have in your heart to do that. I just give
    you that advise, not as criticism, because I know you really
    believe that. But read Cap Weinberger's biography. He was good
    at pushing Stockman around. Thank you. And thank you, Mr.
    Chairman.
        Mr. Young. Thank you, Mr. Kildee. Let's turn now to my good
    friend from American Samoa.
        Mr. Faleomavaega. Thank you, Mr. Chairman. It's always a
    personal welcome to see the assistant secretary of Indian
    Affairs here with us in the Committee. Secretary Gover and our
    good friends also from the Indian Health Service, I do have a
    couple of questions and maybe one basic observation that is
    somewhat at a loss.
        Basically, this year the Administration has requested only
    $168 million for Indian Health Service contract support costs
    and yet we need about $250 million to really do the job in a
    better way. Am I correct on this?
        Mr. Black. The Administration has actually requested a $35
    million increase to a $203 million base in 1999. So the request
    is actually $238 million for contract support costs in 1999--
    2000, excuse me.
        Mr. Faleomavaega. Okay. Do we need an authorization to
    increase the level of what you need as far as what the
    authorizing committee is concerned?
        Mr. Black. No. No, we don't believe an authorization is
    needed. In fact the 638 law speaks to the necessity of funding
    these types of costs at 100 percent. It's just a matter of
    having sufficient appropriations to do so.
        Mr. Faleomavaega. Now, do you get the sense that this is
    also the reaction from the appropriations committees, that
    we're on the right level of funding? Because the information I
    have here is the appropriations committees do not agree with
    your assessment. You are only asking for $168 million, and yet
    for the unmet needs we need to come up with about $250 million.
    Is the information I'm reading wrong as far as you are
    concerned?
        Mr. Lincoln. Yes, Congressman. The amount of funding that
    we actually have available this year is $203 million, as Mr.
    Black said. And we're requesting an additional $35 million to
    bring it to $238 million. We believe the Appropriations
    Committee, in our discussions with the committee, is concerned
    with a number of issues associated with contract support costs.
        One of their concerns that has been expressed to us in
    various ways is the increase in the need for additional
    contract support costs based upon, though, an analysis that has
    been performed working with tribes. But also an independent
    analysis that we've done, we believe the increased need for
    contract support costs is primarily based upon the increased
    contracting that is occurring out there. And so more and more
    of the program is coming under contract, and therefore the need
    for contract support costs is increasing.
        Mr. Faleomavaega. So in your opinion, you don't need any
    help from this Committee as far as authorization in concerned?
        Mr. Lincoln. To the extent that this Committee can make
    known the issues associated with contract support costs,
    including the requirement and estimated need for resources,
    that would be very helpful.
        Mr. Faleomavaega. You are losing me, Mr. Lincoln. Tell me
    the bottom line, how much to you need?
        Mr. Lincoln. In year 2000, we estimate that the Indian
    Health Service would need an additional $100 million to the
    $238 million, in round numbers.
        Mr. Faleomavaega. Now, do you need an authorization?
        Mr. Lincoln. No, we do not. We believe we have the current
    statutory authorization. We need the appropriation.
        Mr. Faleomavaega. Well, I'm glad to hear that because I'm
    just a little upset about the whole process, Mr. Chairman. And
    not taking anything from the sincerity of our friends here from
    the Indian Health Service, but it's so easy for us to find $18
    billion to bail out the financial crisis in Indonesia with a
    corrupt dictatorship and fraud and nepotism and corruption,
    billions to help Korea, billions of dollars to bail out Bosnia,
    and yet we always seem to be trying to look for crumbs to help
    the indigenous Native Americans in their needs. To me that's an
    insult.
        But I sincerely hope, gentlemen, that the piece of paper I
    have before me is wrong in its assessment, that we're not short
    in funding the IHS contract support costs. I'm very happy to
    hear this.
        Mr. Gover, you mentioned that over 50 percent of the BIA
    funding goes to the tribes?
        Mr. Gover. That's correct.
        Mr. Faleomavaega. So how much of the administrative cost of
    the total budget goes to the administration then?
        Mr. Gover. Of BIA's total?
        Mr. Faleomavaega. Yes.
        Mr. Gover. We believe it's less than 10 percent. I would
    have to go back and do some work to get you a number.
        Mr. Faleomavaega. Does this mean the decrease of the
    employees now, the BIA, from 17,000 to 10,000, it also means a
    decrease of everything else the BIA needs?
        Mr. Gover. There has been a sharp decrease in the BIA in
    almost every program. Both the tribes' contract as well as our
    administrative function. We too were subject to a dramatic riff
    in FY 1996.
        Mr. Faleomavaega. Now, you mentioned that there should be
    an increase on contracting for self governance, that's your
    recommendation?
        Mr. Gover. Absolutely.
        Mr. Faleomavaega. How much do you think we need to have on
    that?
        Mr. Gover. To get the tribes to contract all these
    programs?
        Mr. Faleomavaega. Yes.
        Mr. Gover. The first step is definitely 100 percent funding
    of contract support. After that, we actually have to begin
    doing some real needs assessments in the communities. What is
    it the tribe really needs, and what would it take to get them
    to assume the responsibilities that we now have? A lot of
    tribes look at our programs and say, ``Look we don't want that
    responsibility because this program isn't funded enough.''
        Mr. Faleomavaega. The problem we're having is--sorry, Mr.
    Chairman.
        Mr. Hayworth. That's okay. The gentleman's time has
    expired, but he has identified some real areas of concern. And
    given the fact that there is a vote on the floor now, we would
    ask the indulgence of the panel and other members of the
    Committee. We will take a short recess and resume following the
    vote so members should return as quickly as possible.
        And we thank the panel's indulgence, and I thank my friend
    the delegate from American Samoa. The Committee is in recess
    pending completion of the vote, and will return here to the
    Committee chambers.
        [Recess.]
        Mr. Hayworth. Mr. Inslee, you have the floor to ask
    questions of this panel. And thanks for coming back as rapidly
    as you did.
        Mr. Inslee. Thank you, Mr. Chairman. Somebody has got to
    hold the fort, so to speak.
        Mr. Hayworth. That's right.
        Mr. Inslee. Thanks for coming and it's good to see you. You
    are in a difficult position because many of us would like to
    see us move forward on self determination and are very
    concerned that these budget numbers are effectively stymieing
    that policy. And I think that you know that's a pretty strongly
    held position, that we do need to move ahead on self
    determination.
        And we hate to see anything stand in our way in that
    regard. And you are in a difficult position because you are not
    the ultimate decisionmakers but you are the ones that are here
    today. And I guess the question is, is it a fair statement to
    say that these numbers that we are looking at, that this
    effectively stymies the intent of the self determination that
    Congress has, I think, repeatedly evinced as our public policy?
        Mr. Gover. Mr. Chairman, I think it's fair to say that the
    primary impediment to the full implementation of the self-
    determination and self-governance policies is appropriations to
    the Bureau.
        Mr. Inslee. Right.
        Mr. Gover. That if we could get these programs up to a
    point where they are really beginning to achieve some of the
    things that they are desiring to achieve, then the tribes will
    be much more interested in taking on even more responsibilities
    than they have.
        I don't think they are particularly interested, nor should
    we be in seeing them take over these responsibilities, only to
    fail. So, yes, if we got the kind of funding that actually
    addressed the extent of the need out there, our agency would
    become really quite small and tribal governments would take
    over these responsibilities.
        Mr. Inslee. During the appropriations discussions, during
    the process, have you heard rationales for not fully funding
    this clear policy of the U.S. Government? I mean what rationale
    is there other than--I'd like to hear it. I've so far not heard
    it articulated.
        Mr. Gover. There are competing priorities. I should say,
    first of all, that this is the first year, that I'm aware of
    that this Administration has proposed substantial increases for
    both BIA and IHS. Our request is about 9 percent above FY 1999.
    I think it's about the same for IHS. So both agencies fared
    reasonably well in the process this year.
        What's so frustrating is a big increase, what appears to be
    a big increase, especially of a time of what's supposed to be a
    flat budget environment, still doesn't begin to address the
    need that we know exists in Indian Country. And so even numbers
    that seem large are small when compared to the need in Indian
    Country.
        Mr. Inslee. I guess what's really bothersome is there are a
    lot of needs in our country, they are infinite in describing
    needs, but this is one that has been determined to be a policy
    of the United States government. And it's very painful to see
    the United States government not fulfilling that policy
    commitment.
        And I guess, for whatever good or help it does to you, I
    hope that you will let everyone who knows, and I recently
    worked with HHS and had a good experience there, that's there a
    high temperature here, at least among quite a number of members
    that this is a very, very important thing to us and we put a
    high level of interest in it. And we're going to work with you
    through this budget process to try to fulfill this commitment.
    Thank you.
        Mr. Young. Mr. Lincoln? Do you want to be recognized to
    give me an accurate number that you misquoted? I didn't even
    know it. You got away with it as far as I'm concerned. Go
    ahead.
        Mr. Lincoln. Mr. Chairman, I very much appreciate the
    opportunity. I was asked what the 2000 need was for the
    contract support costs in the Indian Health Service. The number
    I gave was approximately $338 million. The correct number is
    $309 million. And we know the Committee has asked for
    projections of need, and we'll make available the detail to
    back up those numbers, sir.
        Mr. Young. A member had a question, and where is he? We'll
    just wait for a minute here. Where is his staff? Would you get
    hold of him? Or I'll ask his question, one or the other. I'll
    fill in some time and ask some questions. How is the weather
    outside?
        Assistant Secretary Gover, the Indian Health Service has
    provided the Committee with detailed tables setting forth each
    tribal contractor's program funding level, contract support
    cost needs, by category of contract support, and FY 1999
    contract support payment being made against that need.
        Could the Bureau please provide the Committee the same
    detailed data we have received from the Indian Health Service
    on individual tribal contract support needs, with each need
    area and its anticipated FY 1999 payments? Long question.
        Mr. Gover. Mr. Chairman, we will do so. We have sent you FY
    1998. FY 1999 is being prepared even as we speak.
        Mr. Young. Okay. The Indian Health Service recognizes
    tribal needs for direct contract support, primarily to cover
    personal associated expenses not available to the agency for
    transfer to a tribe. Why has the Bureau never before recognized
    tribal needs for direct contract support costs in addition to
    indirect costs as the Indian Health Service has done so?
        Mr. Gover. I don't know why it hasn't in the past but as we
    addressed in my statement, in my oral testimony, we are
    considering that. Basically, through the process with NCAI and
    with IHS over the past year, we've become persuaded that this
    is quite likely an appropriate cost for us to pay.
        Mr. Young. I have been asked to submit a question by the
    gentleman from Hawaii. And I so in writing and you can answer
    directly to him. With that, if there is no more questions of
    this panel, I'll dismiss the panel. And, thank you, for your
    directness and I hope we can go forth and solve these problems.
    Thank you very much.
        The next panel is Mr. Ron Allen, president of the National
    Congress of American Indians; Mr. Orie Williams, executive vice
    president, Yukon Kuskokwim Health Corporation, Bethel, Alaska;
    and Lt. Governor Cecil Antone, Gila River Indian Community,
    Sacaton, Arizona.
        And I am going to allow Mr. J.D. Hayworth to chair the
    meeting. And Mr. Williams and I discussed his testimony and I'm
    quite pleased and enamored with it. And we'll solve these
    problems, but I have another meeting I've got to go to, so Mr.
    J.D. will take over. I appreciate it.
        Mr. Hayworth. [presiding] And as we get the appropriate
    labels attached to the appropriate guests, and guests on the
    Committee dais as well, we will begin. Mr. Allen, we'd be happy
    to have your opening statement, if you please, sir.

    STATEMENT OF MR. W. RON ALLEN, PRESIDENT, NATIONAL CONGRESS OF
                            AMERICAN INDIANS

        Mr. Allen. Are you calling upon me, Mr. Chairman?
        Mr. Hayworth. Yes, sir. We'd be happy to have your
    statement.
        Mr. Allen. Mr. Chairman, on behalf of the National Congress
    of American Indians, it's a pleasure to be here and testify and
    share some observations along with my colleagues with regard to
    the contract support issue. You have our testimony for the
    record and accompanying it is a couple of reports on the
    progress that we've made with regard to this topic.
        We want to begin this discussion by saying that the Self-
    Determination Act passed in 1975 essentially made a commitment
    to empowering tribal governments. And we have made substantial
    progress. And today, in 1999, the issue here is a topic that
    causes us a great deal of frustration with regard to contract
    support. You know, we have spent a great deal of time
    eliminating the paternalism and forced dependencies and the
    patronizing bureaucratic ways of dealing with Indian affairs
    that we have witnessed for decades. And we have now seen tribal
    governments begin the process of becoming fully empowered and
    capable governments to manage their own affairs as we move
    forward today.
        In terms of taking over Federal programs, we eventually
    started to grow in our capacity and started to ask the
    fundamental question, how much of the Federal system should we
    be taking over and how much should be left in order to
    administer what we would call ``inherent Federal functions.''
    We firmly believe that we are moving forward with greater
    autonomy and with responsibility and accountability for these
    resources.
        The contract support component of this issue is one that
    causes us a great deal of frustration because it is a policy, a
    Federal policy that is inconsistent. We believe that if you
    look in every corridor in which the Federal Government
    administers contracts with different entities out there,
    whether it's educational institutions, or even within the
    agencies and departments in the Federal Government itself, you
    will see that they fully pay these consistent and similar costs
    for those entities.
        You would never underfund the educational institutions out
    there, you would never underfund the administrative costs for
    defense contractors, you never underfund yourselves when you
    transfer funds back and forth between agencies and departments.
    And I would footnote, the rate that you share these costs back
    and forth when one agency does something for another agency
    averages around 48 percent.
        The average rate for contract support expenses and indirect
    cost rates for Indian Country is around 25, 26 percent. So we
    aren't even at the same level of the rate of recovery of cost
    as you see elsewhere throughout the Federal system. The issue
    for us is how are you going to administer these costs with
    regard to the programs and activities that we're taking care
    of?
        So as we take over more Bureau programs, as we take over
    more IHS programs, these costs, the indirect costs, the direct
    contract support costs, the start up costs for taking over
    these functions are all legitimate costs. They are all
    straightforward costs, they are established by rules that the
    Federal Government establishes, negotiated by the Federal
    Government, so there is nothing wrong with these costs.
        The thing that's frustrating for us is that when you
    underfund and you've been underfunding for two decades, for two
    decades you have been underfunding us, it means that when we
    take over these Federal programs, we are subsidizing with our
    limited dollars Federal Government programs, the programs that
    you are responsible for in serving our people.
        And we find it very frustrating, the notion that the
    Congress or the Administration says we've got to make
    priorities in terms of what we can pay for means we can only
    pay for so much of this and so much of that. But when you take
    over these programs, these are costs that come with it. And in
    1994, as the previous panel noted, it recognized that you will
    not underfund us. That you will not continue to underfund the
    tribes with regard to the contract support. Can you resolve the
    underfunding of tribes with regard to Federal agencies outside
    of the BIA and IHS which are the two primary funding agencies?
    So the frustration for us is that is absolutely outrageous. The
    number is outrageous. If you got around $4 billion between
    these two agencies alone, it's a little over $4 billion, the
    issue to us is that you are telling us that another $150
    million is too high a price to pay for the empowerment of
    tribal governments.
        And our point is if we're going to advance devolution+--
    ``devolution'' means that we are empowering the local
    governments to take care of the community needs--if it works
    for the states and local governments, why doesn't it work for
    the tribes? The tribes, you know, can take care of their people
    and manage their resources.
        So the issue with contract support is that if you take away
    from these hard costs it means that you are eliminating direct
    services. That's what you are doing. Whether it's health care
    services, enforcement services, natural resource management
    services, travel costs, and so forth, and programs that advance
    the welfare reform legislation, then you are cutting away from
    those programs to address those needs in our communities. They
    are paying for these hard costs for facilities and basic
    accounting responsibilities, et cetera.
        So we're pointing out that we're working with the
    Administration and we want OMB to own up to this responsibility
    and quit rationalizing. It is a dry topic, we acknowledge that.
    But it's a topic that we can understand. It's a topic that we
    can show you in layman's terms how it works and why it's
    legitimate. And Congress needs to own up to that responsibility
    so we are asking you to work with us.
        NCAI has a task force. We will present you a report in
    April and that report will show what we believe is constructive
    solutions for resolving this issue. Thank you.
        Mr. Hayworth. Mr. Allen, we thank you for your testimony.
    We look forward to the report, and we thank you for your candid
    comments which many of us here share and are happy to hear.
        [The prepared statement of Mr. Allen may be found at the
    end of the hearing.]
        Mr. Hayworth. Let me call upon the gentleman to whom our
    Chairman alluded, before he had to exit, his good friend from
    Bethel, Alaska, Mr. Williams for his testimony.

    STATEMENT OF MR. ORIE WILLIAMS, EXECUTIVE VICE PRESIDENT, YUKON
              KUSKOKWIM HEALTH CORPORATION, BETHEL, ALASKA

        Mr. Williams. Thank you, Mr. Chairman. I'd like to
    introduce Mr. Lloyd Miller, Esquire, who is a renowned tribal
    attorney who has helped our tribe and others across the Nation
    deal with this issue and many, many others. I'd also recognize
    Ken Brewer, in the audience, a chief executive officer from
    SEARCH, who has worked on contract support for years, on the
    technical and accounting parts.
        Good morning, Mr. Chairman, and honorable Committee
    members. My name is Orie Williams, and I am the executive vice
    president of the Yukon Kuskokwim Health Corporation, based in
    Bethel, Alaska. Thank you for the opportunity to testify this
    morning on what Congress 10 years ago called the single most
    serious problem with implementation of the Indian health
    information policy. Namely, the failure to fully fund contract
    support costs.
        YKHC serves as a consolidated health care provider for 58
    federally recognized Alaskan native tribal governments, spread
    across a roadless area the size of South Dakota. Poverty and
    poor health have led some to compare conditions in many of our
    villages to those faced in Third World countries.
        Indeed, over 50 percent of all our tribal members are
    Medicaid eligible. In many of our villages the unemployment
    rate exceeds 80 percent. And most of our village homes use six
    gallon plastic buckets for toilets. You may have heard them
    referred to as ``honey buckets.''
        Prenatal mortality is more than double the average of the
    U.S. rate. Death by suicide is four times the national rate.
    Fetal alcohol syndrome and fetal alcohol effect are rampant.
    And the lack of adequate sewer and water systems has left our
    communities victim to every known infectious disease and higher
    rates of tuberculosis, even as we enter the 21st century.
        Our tribal governments, working together to maximize the
    opportunities available under self-determination and self-
    governance, are meeting the many challenges we face through the
    direct administration of 47 village clinics, one mid-level sub-
    regional clinic, with two others under construction, a 51-bed
    hospital, and over 1,000 employees operating with approximately
    $40 million in Indian Health Service funding.
        We have done much to improve the delivery of health care
    services since the days of Indian Health Service
    administration. But the contract support shortfall we face of
    over $2.3 million consistently cripples our ability to do more.
    As my written testimony details, the shortfall has meant
    deficiencies in our accounting department, our billing and
    admissions department, our technology support, and our hospital
    and facility maintenance.
        In addition, the short fall has required us to transfer
    funds from key programs, and has not allowed us the flexibility
    to enhance our substance abuse and mental health services, home
    health care for the elderly, village clinic operations, and to
    promote disease prevention and health education. To those who
    are unfamiliar with health care conditions in rural Alaska, our
    deficit is just a number. For us it is having a real impact on
    the quality of health care in general.
        Having contracted the operation of health care programs in
    the Yukon Kuskokwim Delta since the mid-1960s, we have the
    following recommendations to offer the Committee as it examines
    the contract support costs system. First, the system itself is
    not broken. So, please do not give in to the temptation to
    replace it with something new. It is a system that works well
    for determining each tribe's necessary requirements to transfer
    and carry out Indian Health Service's health care programs. In
    1988, the Committee closely scrutinized the entire contract
    support system and came up with only one recommendation for
    fundamental change. The system must be fully funded. In 10
    years that has not changed.
        Second, the Committee would reject persistent calls for
    change in the underfunded Indian Health Service contract
    support system by a flat pro rata approach. That proposal,
    considered and properly rejected last year, would have only
    made our own situation worse, causing massive layoffs and
    instability. Yes, it is true that the underfunding across
    Indian Country, is for a variety of reasons, uneven, but the
    answer is not to reallocate the misery among the Nation's
    tribes, the answer is to meet the Country's obligation to all
    the Nation's tribes.
        Third, we agree with the Committee's concern that despite
    vast improvements in recent years, the Indian Health Service
    must still do more to downsize and transfer to tribes both
    headquarters resources and many of the resources in the area
    offices.
        Not everybody in the Indian Health Service system fully
    embraces the self-governance process, and the bureaucracy
    therefore often misuses such concepts such as ``residual'',
    ``inherently Federal,'' ``transitional,'' and ``business
    payment plan.'' More often than not, these are simply phrases
    and devices used to protect the Federal bureaucracy from being
    transferred to a tribal operation.
        Fourth, we ask the Committee to remember that the Indian
    Self-Determination Policy was initially designed and announced
    by President Nixon, not as a means of saving the Federal
    Government money but as a way to end Federal paternalism and
    promote tribal accountability and responsibility. Congress and
    Indian Health Service and the tribes will fall short of that
    goal if our focus becomes preoccupied strictly with a cost
    accounting of how much the system costs to operate and why
    there are differences in those costs.
        Fifth, to make the self-determination policy as efficient
    as possible, Congress should promptly enact the permanent self-
    governance legislation that passed the full House last year as
    H.R. 1833. In addition, IHS should expand to all tribes the so-
    called ``base budget'' multi-year funding approach, so the
    tribal savings and administrative overhead remain available for
    program delivery.
        Sixth, let us build on the success that we have already
    achieved by opening the door to permit tribes to contract over
    non-Indian Health Service health care programs currently
    operated by the Department of Health and Human Services.
    Enacting Title 6, the Indian Self-Determination Act again, as
    proposed last year, in H.R. 1833, will help us lay the ground
    work for achieving greater economic efficiencies in health
    care, as tribes bring more and more programs together.
        Similarly, extending the Medicare and Medicaid
    demonstration program, as proposed in S. 406, will allow us to
    more efficiently bring in third party resources so that the
    level of care being funded across Indian Country can be
    enhanced.
        We are thankful to the Committee for once again focusing
    Congress' attention on contract support costs. At long last the
    system must stop punishing tribal health care providers that
    take up the self-determination and self-governance challenges
    to operate Indian Health Service programs.
        I say ``punish'' because if a tribe or tribal organization
    wants to operate an Indian Health Service program, if it wants
    to take on the responsibility for the health of its people, if
    it wants to break the cycle of paternalism and dependency,
    there is a price; The tribe must finance the government's
    underfunding of contract support directly out of program funds.
    Congress does not ask this of the Department of Defense
    contractors, and Congress certainly should not ask it of tribal
    health care providers.
        We believe the Indian Health Service's new estimates for
    fully funding the contract support system are conservative and
    achievable in this fiscal year. We also believe that restoring
    the Indian Self-Determination Fund to between $10 million and
    $15 million a year may be sufficient to meet the average rate
    of growth the Indian Health Service anticipates in the years
    ahead.
        Self determination and self governance work and other
    tribes should be encouraged by Congress to move forward as we
    have in Alaska. Tribes and tribal organizations should not be
    told we must wait one, two, or more years either to operate a
    program or to receive contract support for a program. And we
    should not be told we can only operate a program if we agree to
    perpetual underfunding in our contract support costs.
        Thank you Mr. Chairman, for the opportunity to testify
    today. YKC looks forward to working with the Committee, the
    National Congress of American Indians, and the Indian Health
    Service to improve the Indian Self-Determination and Self-
    Governance Acts.
        Finally, we extend an invitation to the Committee, the
    Committee members, their spouses, and staff to visit us in
    Alaska in the Yukon Kuskokwim Delta region. We would like to
    share with you the sights of our great state and the
    hospitality of our people, and have you witness first hand our
    villages and our efforts to improve the health of our people. I
    pray for you and your families, the best of good health.
        Mr. Hayworth. Mr. Williams, we thank you for your testimony
    and for your invitation. As my friends from Arizona will
    attest, especially in the summertime, round about August, it
    gets pretty hot on the desert floor and we think the climate
    would be a marked contrast in the great state of Alaska. So
    thank you for that kind and generous invitation, as well as
    your testimony.
        [The prepared statement of Mr. Williams may be found at the
    end of the hearing.]
        Mr. Hayworth. Again using the prerogative of the Chair,
    last but not least, I'm pleased to call on one of my
    constituents. And by way of introduction of this particular
    gentleman, let me simply point out something that has already
    been included in the record but I need to articulate.
        As my colleague from Michigan and my friend from American
    Samoa will attest, the whole issue of contract support costs
    was something that we worked very closely together on a
    bipartisan, indeed, a non-partisan basis to make some profound
    changes in the closing days of the 105th Congress.
        My friends from the Gila River Indian community in dealing
    with this matter, as an additional $35 million was provided for
    the queue, Gila River could have received its $4 million
    contract. But I think this was significant. The tribe was
    willing to lose $1.2 million in 1999 to fix the process and
    ensure that all tribes are receiving at least 70 percent of
    their FY 1999 request. That's a far cry from the 100 percent
    promise to the tribe.
        But Gila River came to the conclusion that other tribes
    that are more economically challenged should not be penalized
    by a system that has gone awry. It is that type of
    responsibility and response to challenges that typifies the
    Gila River Indian community and my good friend Lt. Governor
    Cecil Antone, from Sacaton, Arizona, who will offer his
    testimony now.
        Mr. Lt. Governor, we welcome you and we thank you, and we
    look forward to hearing your testimony right now, sir.

       STATEMENT OF LT. GOVERNOR CECIL ANTONE, GILA RIVER INDIAN
                      COMMUNITY, SACATON, ARIZONA

        Mr. Antone. Good morning, Mr. Chairman, members of the
    Committee. My name is Cecil Antone. I am the Lt. Governor of
    the Gila River Indian Community. In the audience today is Mr.
    Pete Jackson, who is the chairman of the Gila River Care
    Corporation, along with one of our council members that came
    yesterday and is here for the hearing, Councilman Earl Lara.
    I'd like to recognize them.
        Our community is located on 772,000 acres in south central
    Arizona. Our community is comprised of 19,000 tribal members,
    13,000 of whom live within the boundaries of the Reservation.
    We have a young and rapidly growing population that presents us
    with a variety of current and future health care challenges.
        Our community is fortunate enough to have a hospital on the
    Reservation. Its program's services in and of themselves are
    not enough to serve the entire community. Our Public Health
    Department provides health care services to our tribal members.
    Our community's experience with contract support cost funding
    exposes some of the weaknesses of past funding practices. It
    also illustrates, however, that significant rewards can result
    when Indian tribal governments embrace the self-determination
    policy articulated in the Indian Self-Determination Act by
    taking over our operation of health care programs.
        Our community has expanded and improved services since
    assuming local operation and management of health care services
    throughout our Department of Public Health and the Gila River
    Health Care Corporation which operates our hospital. We
    restored services that IHS was forced to eliminate due to
    inadequate funding in the early 1990s. We have changed aspects
    of our health care delivery system which has resulted in
    increased outpatient visits and redirection of services to
    target our community's most serious health needs.
        We have made these improvements despite operating our
    hospital for more than three years with no contract support
    cost funding whatsoever. We are also beginning to convert the
    Department of Public Health from an underfunded and overworked
    tribal health care agency to a public agency we believe can
    rival the best of local and state programs. These tremendous
    strides in health care service improvements by our community
    have been made at the same time a significant cost savings have
    been achieved through the assumption of local operation of
    administrative functions.
        Despite these improvements, our total funding of the
    hospital only provides approximately $1,400 per patient, well
    below the national average of $3,000 per patient. Underfunding
    contract support costs is a significant factor in keeping our
    funding per patient so low.
        Every contract support dollar that we have been short
    changed is one less dollar that we can spend on health care
    services over the past three years that we have been operating
    our hospital. The hospital has had to absorb over $10 million
    in unfunded contract support costs. As you can see, these
    dollars would have made a significant impact in bringing per
    patient funding closer to the national average.
        We need a firm commitment from Congress and the
    Administration that they will maintain 100 percent funding for
    contract support services for the future. This is the central
    theme of my testimony today.
        Now I would like to briefly address certain of the issues
    that have been raised in the Committee's letter to Dr.
    Trujillo. First, we support Federal legislation that would
    provide a reduction in IHS administrative costs, consistent
    with the goals of Indian self determination, so long as the
    diverse and unique needs of all Indian tribal governments are
    considered.
        Second, we strongly support legislation to make self
    determination permanent within IHS. We appreciate the
    Chairman's leadership in inducing and securing passage in the
    House of H.R. 1833, in the 105th Congress. And we look forward
    to supporting similar efforts in this Congress. Clearly, it is
    vital to the policy of self determination that Indian tribal
    governments have the continued right to enter into self-
    determination contracts. We strongly support lifting the 638
    contract moratorium applied by Congress this past year on any
    new and expanded 638 contracts. The moratorium is a direct
    affront to the right of self governance and self determination
    provided to Indian tribal governments under Federal law.
        Fourth, we encourage Congress to remain committed to
    increasing contract support costs not only within the IHS
    budget, but also within the Bureau of Indian Affairs budget. In
    addition, any proposed Congressional solution to contract
    support costs must address contract support costs within IHS
    and the BIA in a consistent manner.
        In conclusion, what our story demonstrates is that the
    self-governance framework can build tribal administrative
    capacity, reduce bureaucracy, save money, and most importantly
    improve the quality of health care services to tribal members.
        And with that, I would like to ask unanimous consent that
    my full statement be entered into the record. I would now be
    pleased to answer any questions the Committee may have.
        But in addition to that, Mr. Chairman, I'd like to
    recognize yourself for all the hard work that you have done
    throughout the years in representing the Gila River Indian
    Community in Congress, as well as other tribal nations
    throughout this country.
        Mr. Hayworth. Mr. Lt. Governor, I thank you for those kind
    words. Without objection, the remainder of your statement will
    be included in the record, and that goes for everyone who has
    joined us here today, for their written statements. But, again,
    I thank you very much for those kind words.
        Let me begin Lt. Governor Antone, with a question for you.
    It may interest all those who joined us today to understand the
    extent to which diabetes is a serious problem within your
    tribal population. And I'd like you to first of all to talk
    about the nature of the problem. And, also, if you could
    address the question, how does contract support cost funding
    relate to that issue of the incidence of diabetes among your
    community's population?
        Mr. Antone. You are absolutely right, Mr. Chairman. Our
    community has the highest incidence of diabetes in the world,
    and it is a significant health care problem in our community
    including among our children. I know you have been a champion
    for fighting juvenile diabetes because we have worked with you
    on issues in the past and we will continue to work with you on
    the same issue in the future.
        Taking over health care programs has allowed us to focus on
    our community's most serious health problems such as diabetes.
    We have been able, for example, to reduce the rate of foot
    amputations relating to diabetes significantly by placing two
    podiatrists at our hospital on our staff. The decrease in foot
    amputations is just one example of how funding to run our
    health care programs is improving the outlook of diabetes
    patients in our community. Even with this progress however, we
    are still so far behind that it remains our top health care
    issue. Every contract support dollar that we don't get reduces
    the money that we can spend on the diabetes care. Conversely,
    every dollar we do get goes into improving the health of our
    community members.
        Mr. Hayworth. Lt. Governor, thank you for your testimony. I
    was privileged to have two members of Congress from both sides
    of the aisle join me on a tour, as you know, of your community
    in the past weeks, and visiting your health care facilities.
    But as you pointed out, as we have seen, your community has
    found ways to improve health care services while absorbing
    millions of dollars in additional costs each year due to
    inadequate or absent contract support costs funding.
        In your mind and through your experience, how was your
    community able to achieve those improvements?
        Mr. Antone. Mr. Chairman, as a result of contracting with
    IHS under the Indian Self-Determination Act, we have found that
    once we were not burdened by bureaucracy we were able to make
    much more efficient use of program dollars that were formerly
    under IHS control. We found not only could we stretch these
    dollars further and gain significant cost savings, but we also
    could create a better quality health care service by tailoring
    our programs to the unique health care concerns of our tribal
    population, and most importantly, the disease of diabetes.
        Mr. Hayworth. Mr. Lt. Governor, in your opinion, is the
    queue system of allocating contract support costs funds
    preferable, if it means getting 100 percent funding later
    rather than 70 percent funding earlier?
        Mr. Antone. Mr. Chairman, although we would have received
    100 percent last year if the funding procedures related to the
    queue had remained the same, the queue system is very
    problematic for tribes. There is no predictability with respect
    to how much funding will be available each year, how long
    tribes will have to wait for new funding, and how long it will
    take to get to 100 percent funding.
        The fact is, however, Indian tribal governments should not
    have to make the choice at all between some funding early or
    more funding later. Ongoing and recurring contract support cost
    funding is Federal policy.
        The real issue is getting Congress to realize that those
    funds promised to tribes must be appropriated in full and
    recurring amounts. Anything less than full and recurring
    appropriations for all contract support cost funding needs is
    an abdication of Congressional responsibility toward Indian
    tribal governments.
        Mr. Hayworth. Mr. Lt. Governor, as I pointed out in
    introducing you, the Gila River Indian Community was willing to
    really step forward and make a sacrifice. Let me ask you again,
    to follow up on that, would your community be willing to
    sacrifice 100 percent contract support costs funding so that
    all tribes could have funding levels raised to, for example,
    about 80 percent?
        Mr. Antone. Last year our community was fully expecting to
    receive 100 percent of its contract support costs needs because
    we had waited patiently for four years to rise to the top of
    the ISD queue. In light of FTEs $35 million in new funds made
    available for the ISD queue last year, however, we agreed to a
    proposed allocation of those funds that would strive to give
    all tribes on the ISD queue 70 percent funding.
        Mr. Hayworth. Mr. Lt. Governor, we thank you for your
    comments and for the efforts of your community.
        [The prepared statement of Mr. Antone may be found at the
    end of the hearing.]
        Mr. Hayworth. Let me turn now to my good friend from
    Michigan for any questions that he may have for the panel.
        Mr. Kildee. Thank you, Mr. Chairman. First of all I'd like
    to thank Ron Allen and Lloyd Miller for participating recently
    in the caucus briefing we had on support costs. That was very
    helpful. We had about 40 staff members there, including a
    member from the Subcommittee on Appropriations, so it was very
    helpful.
        As a matter of fact our Native American Caucus has grown
    from 55 members last year to 74 members this year from both
    parties, so we are going to become more proactive. And your
    participation in that briefing was very, very helpful and will
    lay the groundwork for that. Also, Lt. Governor Antone, please
    give my greetings to Governor Murray Thomas. I've enjoyed
    visiting your Nation out there. Having grown up wanting to be a
    fireman, I was captivated by your fire department out there. I
    spent more time in the firehall talking to the fire fighters,
    but it was very interesting.
        And whether we have a queue system or pro rata the whole
    thing will be solved if the United States Government obeys the
    law passed in 1975. We have broken treaties and we've broken
    the law. And we don't really need an authorization for that
    because that was in the 1975 law, the appropriations and the
    budget process, to call for that money.
        And I certainly will begin to increase my pressure on the
    Executive Branch of Government. We have now a surplus in the
    budget, no longer a deficit. We're saving most of that surplus
    for Social Security and Medicare. But certainly we can find the
    dollars for our commitments to the Native American Nations in
    this Country. And I will increase my advocacy for that. And we
    need your help in doing that, and you've already helped. I just
    appreciate all your testimony here today and look forward to
    working with you. Thank you.
        Mr. Antone. Congressman Kildee, Mr. Chairman, I appreciate
    your kind words and I'll relay the information to Governor
    Thomas.
        Mr. Hayworth. Thank you Mr. Kildee. The gentleman from
    American Samoa.
        Mr. Faleomavaega. Thank you, Mr. Chairman. I'm sorry that I
    wasn't able to follow up with a couple of questions I had with
    a previous witness but I certainly welcome our panel members.
        Mr. Hayworth. If the gentleman will yield? If my friend
    from American Samoa would like to submit those questions in
    writing?
        Mr. Faleomavaega. I definitely will.
        Mr. Hayworth. Without objection, it is so ordered.
        Mr. Faleomavaega. And my good friend Ron Allen, there are
    some 500 tribes currently in United States, Mr. Allen. How many
    do participate in this contracting program of self governance?
    Do you have any idea?
        Mr. Allen. Well, it's probably in the neighborhood of 325
    to 350 that are contracting or compacting.
        Mr. Faleomavaega. And in your opinion this has gone very
    well since it's been implemented?
        Mr. Allen. Well the contracting movement, in terms of
    taking over the programs has been very constructive because the
    tribes have wanted to take over these programs and services and
    manage them for themselves according to their own governmental
    priorities, and so that has been moving forward. And the
    contract support issue and the notion that it's out of control
    has become a new kind of political impediment.
        Mr. Faleomavaega. Do you agree with the Administration's
    assessment in terms of the proposed budget? I had outlined that
    the Administration had actually requested only $160 million and
    they disagreed. And they are actually requesting almost $250
    million for this contract services program. Is that in line
    with your underfunding of the budget proposal for FY 1999?
        Mr. Allen. Well, I guess it's about, somewhere around $240
    million, just under I think, for next year, FY 2000. And they
    had revealed that there is a need for an additional $100
    million and we concur with that. One good thing about IHS is on
    their side of the aisle they have done a good job in getting
    more accurate data.
        Their data is pretty accurate now in terms of how many
    contracts are out there and what that level of shortfall is
    both from those that are new programs by tribes, or new tribes
    that are taking on programs, as well as the shortfall for
    existing contracts and shortfalls in start up monies as well.
        One other factor that was weighed into that number they
    gave you is that it's an inflationary adjustment. And you know
    the Federal Government gives COLA adjustments, inflationary
    adjustments all the time. Unfortunately, we never get them. And
    they'll come up with a rationalization of why they shouldn't do
    that.
        So we're urging IHS and BIA, as they make their
    projections, to insert that inflationary adjustment because the
    cost of securing those services is increasing.
        Mr. Faleomavaega. So in your best assessment, whenever we
    talk about Indian funding, there has never been any indexing
    done as far as adjusting for inflation?
        Mr. Allen. No, it's not adjusted. Basically, all they are
    doing is taking the raw numbers and transferring them over to
    the next year, and then adding whatever they can justify for
    additional increase in CSC numbers in conjunction with the ISD
    Fund. It was pointed out earlier that the ISD Fund, which is
    for new contracts, needs to be reinstated in IHS. It is on the
    BIA, and it does need to be reinstated on IHS to accommodate
    those new contracts.
        Mr. Faleomavaega. I know we do it for the Department of
    Defense and for other Federal agencies but not for the Indian
    Services. I'm very surprised. Mr. Williams, I enjoyed listening
    to your testimony about the problems affecting Native Alaskans.
    Do I understand that of the program under the Indian Health
    Service, do the Native Alaskans have a separate Indian Health
    Service program, or are you all grouped in it together with the
    continental Native Americans?
        Mr. Williams. We're all under the same system. We're part
    of the United States, as I'm sure you are well aware, but are
    all under the same system. The Alaskan area has their own area
    office which, as of January, is all contracted. In YKHC's case,
    we've contracted everything available to us. In the State;
    under the demonstration, the 226 tribes have come together
    under one compact with Congress, with the United States, under
    the same system and criteria as other tribes in the continental
    United States.
        Mr. Faleomavaega. So your program is little different
    structurally because of the way the----
        Mr. Williams. It's 58 individually recognized Federal
    Governments that have come together because of their size and
    ability to generate the funds and work together to get the best
    efficiency out of the funding that we do have. These are very
    small tribes; we have 58, the largest one is about 3,000
    members and the smallest one might be 48 members. So for
    economy of scale they have joined together under one agreement.
        And they tribally elect their board members. The tribes
    elect the people that make the priorities on the health care
    delivery system. Then prioritize them every year. We bring
    tribal members in, they prioritize the health care delivery
    system. You've given us the flexibility to work within the
    funding level that we have to make that system delivery
    possible for them.
        Mr. Faleomavaega. And the funding level has not been at all
    sufficient to meet those needs?
        Mr. Williams. No. I call it a ``crisis care delivery
    system.'' When somebody can't afford to go to see a provider
    until they are so sick that they have to go to the hospital,
    and they can't go for prenatal visits, that's a crisis care
    system. We want to transfer that to a prevention system.
        Mr. Faleomavaega. Thank you, Mr. Chairman.
        Mr. Hayworth. Thank you, Mr. Faleomavaega. The gentleman
    from Washington State.
        Mr. Inslee. I'd ask consent to place a statement, if I may?
        Mr. Hayworth. Without objection, it's so ordered.
        [The prepared statement of Mr. Inslee follows.]

      Statement of Hon. Jay Inslee, a Representative in Congress from the
                              State of Washington

        Mr. Chairman, I am glad that we have the opportunity to
    learn more about the critical and sometimes complicated issues
    surrounding contract support costs for Indian programs. I look
    forward to hearing from and working with my colleagues on the
    Committee and today's witnesses, especially NCAI Chairman Ron
    Allen, who is chairman of the Jamestown S'Klallam Tribe in
    Washington. For those of my colleagues who may not know this, I
    am privileged to have the Jamestown S'Klallams located in my
    Congressional District.
        The Indian Self-Determination and Education Assistance Act
    gives tribal governments the rights to assume local control
    over Federal Indian programs, such as health care, law
    enforcement, education, and natural resources management. A
    major principle of the Federal Government's policy under Self-
    Determination is that tribal governments should not be
    penalized financially for exercising their right under the law
    to operate their own programs.
        Yet, that is the situation we find ourselves in today.
    Because Congress has failed to fully fund the costs associated
    with contracting, tribal governments are increasingly forced to
    spend their program funds to offset their contract support
    costs, pay these costs from tribal funds, or cut critical
    administrative activities below the level needed for contract
    compliance. I am concerned that the effect of this shortfall is
    that we are taking funds from one needed program in order to
    pay the administrative costs of another.
        In addition, I am concerned that the current moratorium on
    new and expanded contracts contained in the FY 1999 Omnibus
    Appropriations Act is a not-so-subtle backdoor approach to
    eliminating the rights of tribes to operate their own local
    programs under the Self-Determination Act. We should not let
    appropriations riders take away Indian self-determination or
    undermine tribal sovereignty.
        I would like to commend the Chairman for holding this
    hearing today. I look forward to working with tribal
    governments, the Administration and my colleagues to find a
    solution to this issue so that tribal governments will be able
    to fully exercise their self-determination rights under Federal
    law.

        Mr. Inslee. I do have a couple of questions, if I may?
        Mr. Hayworth. Certainly.
        Mr. Inslee. First, I want to thank you all for coming,
    particularly Mr. Chair for journeying from the serene bay where
    you hang your hat all the way to try to horsewhip Congress into
    doing the right thing. That takes a lot of energy and we
    appreciate that.
        But I'd like to ask you why do you perceive, and this is an
    issue that folks who believe in devolution, folks who believe
    in having local governments handle affairs, folks who believe
    we ought to devolve power to the governments who are closest to
    the people, also at times some of those folks seem to be the
    ones most opposed to fully funding self determination.
        Why is that? I mean, what possible reason do you think we
    are up against in trying to convince them to fulfill this
    obligation to the Native American Nations?
        Mr. Allen. Congressman, it's a complicated question you
    ask. And I guess one of my simple answers is that I believe
    that there is a subliminal philosophy that permeates throughout
    our society with regard to Indian affairs, who the Indian
    people are, what our governments are all about. And I believe
    that as you move the Federal policy of empowering tribal
    government forward there is not really a belief that tribal
    governments were going to be really fully empowered, tribal
    governments.
        And over the course of the last 25 years tribes have proven
    that they can be very effective in every aspect of governmental
    operation. And all of the sudden you end up with a new level of
    clashes over jurisdiction and control, over controlling affairs
    over our communities whether it's in rural settings or it's in
    urban settings. And, unfortunately, there is this notion that
    there is no obligation to the Indian people into perpetuity for
    the relinquishing of the lands and the resources that our
    peoples gave up. That is simply a premise that is unacceptable.
    It isn't honoring the commitment of the United States to these
    peoples and our governments.
        Now, as tribal governments continue to grow there is a
    notion, and it hides behind different theories, about how to be
    accountable for the Federal resources designated to serve our
    communities. It is increasing but it is not increasing
    proportionately.
        But we're going to show you and the rest of the
    Congressional leadership, in our education campaign, that when
    you look across every Indian program, we are categorically not
    maintaining the same pace as the other programs serving
    mainstream America. And even though there is increases,
    proportionately we are not increasing and keeping pace with
    mainstream America.
        How are we expected to be self sufficient, how are we
    expected to become independent governments within the Federal
    system, and how are we going to serve our people? We cannot, if
    we're not provided the same respect as other governments.
        Mr. Inslee. Well, I appreciate your passion. You know,
    sometimes I encourage witnesses to be dispassionate, but in
    this case I welcome it. And I'm glad you are here showing it
    because I think it's appropriate. Let me ask, and anyone on the
    panel can help me. Is there a current litigation? One of the
    previous panelists made reference to a court case of some sort
    involving the BIA. If anybody could tell me the status of that,
    I'd appreciate it.
        Mr. Miller. Yes, Congressman, there are presently about a
    half dozen cases wending their way through different parts of
    the court system. Some of them are in the Interior Board of
    Contract Appeals, some of them are at the Appellate level of
    the Federal System, some are in the Federal District Courts.
        Assistant Secretary Gover alluded to a judgment awarded
    against the Bureau of Indian Affairs on behalf of all tribes in
    the United States, a deal with the Bureau of Indian Affairs.
    The matter was concluded on liability, as settled, on damages
    at $76 million. That sum is now being approved by the Federal
    District Court, and we understand a final approval is imminent
    any day this week.
        Mr. Inslee. And what is the basis? I mean how is that
    number adjudicated? Does that go to a certain time period or--
    --
        Mr. Miller. Yes, it was a certain time period. Prior to
    1994, between 1988 and FY 1993, for those fiscal years, the
    Bureau of Indian Affairs employed a method for determining
    contract support costs that actually diluted its
    responsibility. It counted in the calculation of contract
    support small programs from other Federal agencies that don't
    contribute contract support but also don't contribute
    materially to the work load of the tribe.
        But counting those programs, the Bureau of Indian Affairs
    was able to shave in a small way its own responsibility, where
    shaving it in a small way for 500 tribes for five years became
    quite a large sum. And the $76 million represents a settlement
    on that amount.
        The case is actually into a second phase now, being handled
    by a Mr. Michael Gross, out of Albuquerque, New Mexico, where
    they will be looking at the BIA policies from 1994 to the
    present.
        Mr. Inslee. Does the shortage which we've been addressing
    here, is that potentially subject to further litigation? Can
    the judicial system solve this problem potentially, if Congress
    does not?
        Mr. Miller. Well, I think the judicial system has been
    called upon by individual tribes and even on a larger basis to
    do exactly that, Mr. Congressman. It would be unfortunate,
    however, I think for the policy of the United States, if it was
    the judiciary that had to call the United States Congress and--
    --
        Mr. Inslee. I'm not suggesting that.
        Mr. Miller. [continuing] into account for such an important
    responsibility. But I think if Congress is unable, working with
    the agencies, with the Indian tribes, to find some common
    ground in this area, the courts are going to continue issuing
    rulings against both agencies that will be extremely costly.
        Mr. Inslee. Thank you.
        Mr. Allen. Mr. Chairman, might I add just a little bit to
    that?
        Mr. Hayworth. Certainly.
        Mr. Allen. In our report to you and the Senate, we're going
    to address this issue and its complications. And we're going to
    throw out some suggestions about how to address this very
    complicated issue that was raised in the court. It causes a lot
    of people a lot of concern. And we believe there is a very
    constructive solution that can be proposed to the Congress in
    terms of how to address it.
        Mr. Hayworth. Thank you. The gentleman's time has expired.
    The Chair would reiterate that if any member of the Committee
    has questions for either the first or the second panel, if they
    would submit questions in writing to the Committee staff. Mr.
    Faleomavaega made the point earlier and we're very happy to
    follow up with those inquiries.
        I would also state for the record that questions in writing
    will be submitted from the Pascal Yaqui Tribe of Arizona, some
    of my friends in my home state who also have some concerns. Is
    there any further business?
        Mr. Kildee. No. I just want to thank the Chairman and
    yourself for chairing this meeting today. I think it was very,
    very helpful. I think this is an area that is not just a legal
    area, it's a moral area. We have a legal and moral obligation
    to carry out those responsibilities and I think you presented
    the case very, very well. We have to pursue this until you
    secure full justice.
        Mr. Hayworth. The gentleman from American Samoa?
        Mr. Faleomavaega. Mr. Chairman, the 11 years that I have
    been a member of this Committee, I, too, would like to echo the
    sentiments that have been expressed earlier in terms of your
    leadership and the dynamic services that you have provided for
    the Indian Country. And I really would like to commend you for
    your dedication to this.
        Because so often and so many times whenever Indian issues
    are brought before this Committee and the Congress--it's not
    because I question the sincerity or the insincerity of those
    members--that affect the needs of our Native American
    community, somehow things just don't get done.
        And Mr. Chairman, I want to thank you for your personal
    attention given to this real serious problem that we have in
    our Nation. And I do want to say that for the record. Thank
    you.
        Mr. Hayworth.I thank you Mr. Faleomavaega. It's good to
    have my friend from American Samoa, who during the course of
    the 104th Congress, on a very aforementioned August day,
    foreswore his tropical paradise to come to the desert----
        Mr. Faleomavaega. Mr. Chairman, as long as you'll continue
    this leadership, I promise I will export more football players
    to the University of Arizona and Arizona State.
        Mr. Hayworth. And let me state for the record, even though
    Arizona is my home, at North Carolina State University, I
    enjoyed the services of Ricky Logo, from Samoa for many years,
    and we appreciated that. And he had to return home to become
    King, so he was certainly well prepared with his education at
    North Carolina State.
        Mr. Faleomavaega. If the Chairman will yield. Most of my
    cousins have played for Arizona State and the University of
    Arizona, and they continue to do so. And I'm going to tell them
    to do so as long as my friend J.D. helps my Native American
    brothers and sisters. Thank you.
        Mr. Hayworth. I thank you, Mr. Faleomavaega. And again I
    thank you not only for your kind comments but all the witnesses
    for their valuable testimony. And if there is no further
    business, again we thank the members and the members of our
    panel. And the Committee stands adjourned.
        [Whereupon, at 12:45 p.m., the Committe was adjourned.]
      Statement of Hon. John M. Spratt, Jr., a Representative in Congress
                        from the State of South Carolina

        Dear Chairman Young,
        Thank you for allowing me the opportunity to submit
    testimony regarding the difficulties encountered by the Catawba
    Indian Tribe of South Carolina in obtaining adequate Indian
    Health Services and contract support funding. The Catawbas'
    relationship with the Federal Government was terminated in the
    early 1960's and was not re-established until Congress passed
    legislation to do so in the mid-1990's. Prior to recognition,
    the tribe did not keep an up-to-date, accurate, or complete
    record of its members. The tribal roll the Catawbas relied upon
    when originally filing for IHS funding understated its tribal
    membership by over one-half.
        The Catawbas first sought IHS funding in fiscal year 1994
    directly following their land settlement and Federal
    recognition. At that time the Catawbas had no paid staff. A
    loose roll of 1,200 members was kept as a courtesy by an
    elderly member, now deceased. Although this roll did not
    reflect an accurate accounting of members' deaths, births, and
    marriages, it was used by the Catawbas because it was the only
    list of members available when the tribe filed for IHS funding.
    The tribe has since found that they have a health service
    population of 2,700, over twice as many as originally reported.
        The Catawbas are currently funded at $1.5 million, or $779
    per person, which is well below the average Indian Health
    Services funding of $1,430 per member. The tribe spends $2.5
    million a year on health care, or $1 million more than IHS
    funds. As a result, they must scrape together this additional
    money from other programs in an already tight budget.
        Other Native American tribes with similar populations are
    funded at twice the level of the Catawbas. The Yuma Indians,
    for example, receive $4.1 million a year for a near identical
    service population. The Catawbas deserve the same level of
    funding received by other similarly situated tribes, and should
    at least get funding commensurate with the current
    determination of their membership.
        In addition, the Catawbas have consistently been denied
    proper payment for IHS contract support costs. Since their
    Federal recognition in 1993, the tribe has been underfunded by
    $1.8 million in contract support costs on their contract. In
    FY97, for example, the Catawbas' contract support rate was set
    at 51.1 percent or $414,368, of which they received only
    $57,000. Without the proper funding, the tribe has both
    downsized their health-related services and taken steps to cede
    the administration of their health program back to Indian
    Health Services. The Catawbas simply cannot afford to maintain
    it without the proper funding.
        Thank you for holding a hearing on this important matter. I
    would very much appreciate having this letter entered in the
    record of the hearing.
                                    ------

        Statement of Michael E. Lincoln, Deputy Director, Office of the
                        Director, Indian Health Service

        Good morning. I am Michel Lincoln, Deputy Director of the
    Indian Health Service (IHS). Today, I am accompanied by Mr.
    Douglas Black, Director, Office of Tribal Programs; and Ms.
    Paula Williams, Director, Office of Tribal Self-Governance. We
    welcome the opportunity to testify on the issue of contract
    support costs in the Indian Health Service. 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 ((ISDEA), Public Law
    (P.L.) 93-638).
        The IHS has been contracting with Tribes and Tribal
    organizations under the Act since its enactment in 1975. We
    believe the IHS has implemented the Act in a manner consistent
    with Congressional intent when it passed this cornerstone
    authority that re-affirms and upholds the government-to-
    government relationship between Indian tribes and the United
    States.
        At present, the share of the IHS budget allocated to
    tribally operated programs is in excess of 40 percent. Over $1
    billion annually is now being transferred through self-
    determination agreements to tribes and tribal organizations.
    Contract support cost funding represents less than 20 percent
    of this amount. The assumption of programs by tribes has been
    accompanied by significant downsizing at the IHS headquarters
    and Area Offices and the transfer of these resources to tribes.
        Contract support costs are defined under the Act as an
    amount for the reasonable costs for those activities that must
    be conducted by a tribal contractor to ensure compliance with
    the terms of the contract and prudent management. They include
    costs that either the Secretary never incurred in her direct
    operation of the program or are normally provided by the
    Secretary in support of the program from resources other than
    those under contract. Itis important to understand that, by
    definition, funding for contract support costs is not already
    included in the program amounts contracted by tribes. The Act
    directs that funding for contract support costs be added to the
    contracted program to provide for administrative and related
    functions necessary to support the operation of the health
    program under contract.
        The requirement for contract support costs has grown
    significantly since 1995 due to the increasing assumption of
    IHS programs. In the fiscal years 1996 and 1997 appropriations
    committee reports, the IHS was directed to report on Contract
    Support Cost Funding in Indian Self-Determination Contracts and
    Compacts. In the development of this report, IHS consulted with
    tribal governments, the Bureau of Indian Affairs (BIA) and the
    Office of Inspector General within the Department of the
    Interior. The report detailed the accelerated assumption of IHS
    programs by tribes beginning in 1995 as a result of the 1994
    amendments to the ISDEA and authorization of the Self-
    Governance Demonstration Project for the IHS. The report showed
    that despite the significant growth in self-determination
    contracting and compacting, contract support cost
    appropriations have remained relatively flat. This has resulted
    in under-funding of contract support costs. The report also
    highlights that the rates for tribal indirect costs, which are
    the major component of contract support costs, have averaged
    around 23 percent of direct program costs over this same period
    of time.
        In addition, pursuant to the statutory requirements of the
    ISDEA, the IHS gathers contract support cost data annually as a
    part of its annual ``Contract Support Cost Shortfall Report To
    Congress.'' This report details, among other things, the total
    contract support cost requirement of tribes contracting and
    compacting under the ISDEA and how these funds are allocated
    among the tribes.
        As a result of the increase in contract support cost
    appropriations in FY 1999, the IHS will be able to fund, on
    average, approximately 80 percent of the total contract support
    cost need associated with IHS contracts and compacts. No tribe
    will be funded at less than 70 percent of their overall
    contract support cost need. Although the IHS projects future
    need for contract support costs on an annual basis, there are
    many variables associated with these projections that are
    outside the control of the IHS. These variables include: the
    fact that self-determination is voluntary and solely at the
    initiative of tribes and that indirect cost rates can
    fluctuate. The contract support costs shortfall at the
    beginning of fiscal year 1999 was approximately $52 million.
        The IHS adopted a contract support cost policy in 1992 in
    an attempt to address many of the issues surrounding the
    determination of tribal contract support cost needs authorized
    under the Act and the allocation of contract support cost
    appropriations from the Congress. This policy was subsequently
    revised in response to the 1994 amendments to the Indian Self-
    Determination Act. In response to concerns expressed by the
    Congress, the IHS is currently working on a third version of
    the policy. We will work with Congress, the tribes, and BIA to
    develop contract support costs solutions that are more in line
    with the budget cycle, in order to better predict future CSC
    needs. In concert with Departmental and IHS tribal consultation
    policies, the IHS is working closely with tribal
    representatives in the development of this revised policy.
        Before any agency policy on contract support costs is
    adopted, tribal leadership is consulted and the significant
    procedures under consideration are discussed in great detail.
    While we do not always arrive at the same conclusion as tribal
    leadership, the process is mutually beneficial and has always
    resulted in a more harmonious relationship. We first engaged
    tribes with the need to modify the IHS contract support cost
    policy last fall.
        Since then, we have met with tribal technicians and
    administrators on three occasions. We are continuing the
    process and will be meeting again in early March. We anticipate
    having a final draft of the policy available for tribal leaders
    to review and comment on in late spring. The policy should be
    finalized by mid-summer for implementation in advance of FY
    2000.
        In addition to the specific IHS contract support cost
    policy work, the IHS and the Bureau of Indian Affairs have also
    collaborated with the National Congress of American Indians
    (NCAI) on the contract support cost study they have undertaken.
    It is my understanding that the NCAI will forward an interim
    report on contract support costs to the Congress in the near
    future. In addition to the NCAI study, the IHS is presently
    providing data and information to the General Accounting Office
    (GAO) to assist that organization in its ongoing review of
    contract support costs. As you know, the Congress has directed
    the GAO to undertake a comprehensive study of contract support
    costs in the IHS and BIA. We look forward to the results and
    findings of that study, which will be delivered to the Congress
    in June.
        Thank you for this opportunity to discuss contract support
    costs in the IHS. We look forward to working with the Congress
    in addressing this important issue. We are pleased to answer
    any questions that you may have.
                                    ------

      Statement of W. Ron Allen, President, National Congress of American
                                    Indians

    I. INTRODUCTION

        Good morning Mr. Chairman. My name is W. Ron Allen and I am
    the President of the National Congress of American Indians
    (NCAI) and the Chairman of the Jamestown S'Klallam Tribe of
    Washington State. NCAI is the largest and oldest membership
    organization of Indian tribes in the United States, and
    advocates on behalf of all the Nation's 558 federally
    recognized Tribes. I am honored by the Committee's invitation
    to appear and testify on the Indian Self-Determination Act and
    the role that contract support costs has played under that Act.

    II. INDIAN SELF-DETERMINATION ACT OF 1975

        The Indian Self-Determination Act of 1975 has proven to be
    the cornerstone of the Nation's modern policy toward empowering
    tribal governments. The Act rejected all of the Nation's past
    failed policies toward our tribes, including paternalism,
    forced dependency, assimilation and outright termination of our
    unique status as governments. In their place, it established
    the basic framework for tribal self-determination, tribal
    economic recovery, transfer of Federal resources and services
    to tribal operations and true government-to-government
    relations between tribes and the United States.
        The Act has directly led to every major American Indian and
    Alaska Native initiative to come before this Congress in the
    last quarter century, and the self-determination goal has
    become a reality for hundreds of tribal communities seeking
    greater autonomy, responsibility, accountability and control
    over their daily affairs and their destiny. Thanks in major
    part to this Committee's continuing and unbroken vigilance to
    protect against any erosion of the Act, either administratively
    or through legislation, the Self-Determination Act has proven a
    resounding success in lifting up our tribal communities,
    elevating the health status of Native American peoples by
    improving the quality and expanding the delivery of our health
    care services, promoting local innovation, relieving
    unemployment, improving educational opportunities, improving
    tribal justice systems and law enforcement, and removing the
    distant Federal Government bureaucrats from our daily affairs.
        Even with these improvements, however, the continuation of
    serious problems still exist. As a 1987 Senate report stated,
    in the course of strengthening the Act, ``perhaps the single
    most serious problem with implementation of the Indian self-
    determination policy has been the failure of the Bureau of
    Indian Affairs and the Indian Health Service to provide funding
    for the indirect costs associated with self-determination
    contracts.''

    III. CONTRACT SUPPORT COST UNDERFUNDING

        The Senate Indian Affairs Committee, and this Committee,
    noted that the failure to fully fund indirect costs had
    resulted in severe difficulties for tribes who incur enormous
    costs not borne by IHS and the BIA, and who must also carry out
    functions similar to those carried out by a variety of other
    Federal agencies that support the BIA and IHS, but which are
    beyond the reach of the Act. For many tribes, the IHS and BIA
    practice of underfunding contract support costs meant either
    compromising on these essential functions, reducing already
    underfunded program services to help cover these requirements,
    or both.
        In 1988 and in 1994, this Committee helped enact
    legislative amendments, among other purposes, intended to
    ``prohibit'' the underfunding practice, thus overcoming the
    funding problems and disturbing consequences. In some respects,
    the amendments worked and some of the contract support problems
    improved. But while tribes went on administering hundreds of
    Federal Indian programs, the agencies continued to defy the
    statutory and contractual mandates to fully fund contract
    support costs.
        With respect to both the BIA and the IHS, the
    administration refused to use all available funds to meet their
    obligations and failed to ask for sufficient additional funding
    from Congress to get around their self-imposed limitations.
    Unfortunately, the Administration eventually supported
    statutory funding ``caps'' designed to protect the agencies
    from ever fully paying the tribes the amounts determined to be
    necessary by the agencies.
        On the BIA side, an additional BIA policy (known as the pro
    rata policy) has long meant that today tribes never know until
    a fiscal year is almost over, and their programs are almost
    fully carried out, how much they will receive in contract
    support costs that year. From year to year, the payment jumps
    up and down anywhere from the mid 70 percent to the low 90
    percent range. Unfortunately, over the last 6 years, the
    payment schedule has averaged in the low 80 percent range. This
    continuing practice seriously undermines the ability of tribes
    to achieve real financial stability and predictability even in
    one year, no less over the longer term.
        To make matters worse, the BIA system fails to provide
    tribes with the same personnel benefits that the BIA's own
    employees receive when they carry out the same programs, making
    it that much harder to maintain service levels in tribal
    communities. From IHS's experience, we estimate that this
    failure actually pushes the BIA payments down in real terms
    another 20 percent below real need.
        On the IHS side, IHS policies have until very recently led
    to a situation where years go by during which some (and
    occasionally all) of a tribe's health care programs receive no
    contract support costs at all. Although the IHS policy does
    offer tribes better predictability from year to year, most are
    nonetheless forced to operate with substantial contract support
    deficits.

    IV. NCAI NATIONAL POLICY WORK GROUP ON CONTRACT SUPPORT COSTS

        Faced with a growing crisis, last year (1998) NCAI
    established a National Policy Work Group on Contract Support
    Costs. Among the many goals of this initiative were: (1) to
    work aggressively with the agencies to improve the contract
    support situation; (2) to begin a serious educational campaign
    here in Congress on the need for contract support costs and on
    the impact of the current crisis on tribal service delivery;
    (3) to work more closely with the two Departments and the
    Office of Management and Budget to increase awareness of this
    critical issue; and, (4) to thoroughly explore all aspects of
    the contract support system and develop options and
    recommendations where improvements can be made for the benefit
    of all concerned.
        Our intense work on this initiative has already contributed
    to achieving real progress on many fronts:

        First, and thanks in major part to the bipartisan
    leadership and sensitivity of Appropriations Subcommittee
    Chairman Regula, Chairman Young and Congressman Miller, Co-
    Chairs Hayworth and Kildee of the House Native American Caucus,
    the House Leadership, as well as the support of Senator Ted
    Stevens, this year's appropriation included a 21 percent
    increase in contract support cost funding. Although IHS reports
    that funding will still be some $90 million short in FY 2000,
    this year's increase has permitted very real correct
    corrections--and changes--to be made to a system in crisis.
        Second, both the BIA and the IHS are now working closely
    with NCAl and others to reexamine their contract support cost
    policies. As a direct result of these efforts, in 1999, IHS
    expects to move all tribes closer to the 100 percent necessary
    funding level that some tribes--but far too few--already enjoy,
    and in doing so to correct the most severe funding inequities
    that have plagued the IHS system. For IHS, this represents a
    major change from past contract support policies.
        Third, IHS in particular has made enormous strides in
    improving the accuracy of its data, thanks to truly tremendous
    and concentrated efforts by the agency, and thanks also to a
    solid commitment to consult and work more closely with tribes.
        Fourth, NCAI has issued two interim reports summarizing our
    work and much needed data on all aspects of the contract
    support cost system. The first report was distributed to all
    members of Congress, all relevant agencies, and all Indian
    tribes; and, the second report is just now under distribution.
    Copies of both reports have been attached to my written
    testimony today, and I think Members will find the information
    invaluable to a thorough understanding of the system. We
    anticipate having our final report out this spring.
        Fifth and last, the Administration has now requested an
    additional 17 percent increase in contract support
    appropriations to IHS for FY 2000. This is the first time any
    Administration's budget request has ever acknowledged to such a
    degree the serious need in this area, and we hope the House and
    Senate will substantially build upon that request in the coming
    months. Although the President's budget reflects an increase to
    remedy the near-equally serious BIA shortfall, here too we hope
    to work closely with Congress and OMB to better address the
    need for FY 2000. Unfortunately, the BIA is projecting
    increased levels which will only fund 86 percent of need in FY
    2000.
        Our reports have also revealed important little known facts
    regarding the contract support system. For instance,

             Our research has clearly dispelled the notion that CSC
            costs are ``out of control.'' Individual tribal requirements
            for contract support costs have remained level over several
            years. In fact, they have not increased and are consistent with
            other Federal agencies contract support cost-type
            reimbursements--even though the average rate of these inter-
            agency rates are almost double that of the average tribal
            indirect cost rates.
             The increased demand for contract support costs over
            the mid-1990s was directly caused by more tribes taking
            advantage of the Self-Determination Act's opportunity to
            operate the IHS and BIA programs.
             On average, contract support costs account for about
            one-quarter of a tribe's total IHS funding (when fully funded),
            and a smaller proportion of a tribe's total BIA funding. The
            difference partly reflects the fact that a number of BIA
            programs involve pass-through payments (such as general
            assistance and scholarships), and partly reflects the fact that
            the BIA still fails to recognize tribal direct contract support
            cost requirements.
             In every year since 1980 both the Federal agencies and
            Congress have known the extent to which contract support costs
            requirements have gone unfunded. And yet, and until this year,
            the amounts made available by Congress, the agencies or both
            have not come close to meeting the need, driving the IHS
            backlog higher and higher, and leaving the BIA system
            essentially stagnant.
             Over one-half of the IHS programs are operated by
            tribes, and a larger portion of the BIA programs operated by
            tribes, involve programs smaller than $500,000, while only 7
            percent exceed $5 million.
             Tribal contract support cost requirements have varied
            due to diverse local circumstances. No ``one size fits all''
            approach can be sensitive to this highly variable situation.
             The rate of growth in tribal contracting and
            compacting activities with IHS and BIA has slowed markedly,
            with each agency now projecting new contract support demands
            per year at approximately $12.5 million and $5 million,
            respectively.
             In a recent three-year period, IHS staffing-reduced by
            6 percent, with substantial additional IHS staff currently
            detailed to tribal programs. In the last 17 years, BIA staffing
            has reduced by over one-third. (Relative to IHS, there are very
            few BIA staff currently detailed to tribal programs.)

    V. CONCLUSION

        Mr. Chairman, a large proportion of the Nation's tribes has taken
    advantage of the Self-Determination Act's opportunity to administer IHS
    and BIA programs. The result has been highly accredited and acclaimed
    health care programs, increased governmental and program service
    delivery through reductions in red-tape and bureaucracy, innovative
    partnerships with state agencies, multi-fold increases in third-party
    revenues from Medicare, Medicaid and private insurance, a broader array
    of program choice for tribal members, more relevant and locally-
    prioritized health and social service programs, and significant and
    measurable improvements in the communities' quality of life.
        We have much to applaud in what tribes have done for themselves in
    the past 25 years, even with legislative and policy restrictions
    including inadequate funding to fully implement tribal self-
    determination and self-governance goals. The Congress and the
    Administration have been advancing the ``devolution'' process to
    empower state and local governments. This movement is based on a simple
    theory that the communities in our country will be better served when
    the Federal Government provides greater control and flexibility over
    Federal resources to address these community needs. This goal should be
    applied equally and consistently with the 558 tribal governments
    throughout the United States.
        One important consideration that must be recognized by the Federal
    Government is that the tribes do not have the same revenue-generating
    base as state and local governmental tax authority system. In
    conjunction with this fact, the Congress must remember it has a
    historical, legal and moral obligation to the tribal governments in
    lieu of the vast lands and resources relinquished to the United States
    by the tribes.
        We therefore respectfully caution the Committee to reject
    recommendations that would revamp the Self-Determination Act in
    significant ways, such as by deferring new contract starts, deferring
    tribal entitlements to receive contract support, or otherwise weakening
    the Act's contract support cost provisions. These options would
    severely undermine the tribes' governmental capacity to provide
    effective and responsible programs and services to their communities.
        We do believe, however, that improvements can certainly be made in
    how the Act has been carried out. For instance, IHS and BIA can report
    to Congress on a more timely basis the contract support cost needs
    anticipated both for the current year and the upcoming new year.
    Further, we believe the agencies can do a better job of refining and
    standardizing the process for determining contract support cost needs.
        The contract support crisis is solvable--with refinement in the
    agencies' policies, the renewed commitment from Congress and the
    Administration shown this year, and the willingness of tribes to join
    in the search for innovations that will help further close the gap.
    Through the collaborative work of the NCAI Workgroup on Contract
    Support Costs, we are developing recommendations which support similar
    CSC approaches and policies within the BIA and IHS. While the Workgroup
    is exploring options regarding consistent standards and criteria in the
    calculation of all aspects of contract support costs (including start-
    up costs, direct contract support cost and indirect costs), these
    options recognize areas of commonality among tribes but are also
    sensitive to the unique differences among us.
        NCAI stands ready to assist the Congress and Indian country to
    reach this goal, and we are hard at work as I speak doing our part to
    make it happen. Mr. Chairman, thank you once again for the opportunity
    to share these thoughts with the Committee.

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        Statement of Orie Williams, Executive Vice-President, The Yukon-
                          Kuskokwim Health Corporation

        Mr. Chairman, thank you for the opportunity to testify
    before your Committee on what Congress ten years ago called
    ``the single most serious problem with implementation of the
    Indian self-determination policy,'' namely the failure to fully
    fund contract support costs.
        To begin, my name is Orie Williams, and I am the Executive
    Vice-President of the Yukon-Kuskokwim Health Corporation. Our
    health care organization is authorized by and represents 58
    federally recognized Alaska Native Tribal Governments, their
    members and their village communities, and we are the second
    largest tribally-operated IHS program in America. We also
    believe we are the most successful tribal operation in the
    country, whether measured in terms of improved patient care,
    improved health status or increased tribal control over the
    health care delivery system.
        Having said that, I must state that I truly believe it will
    take the next 10 to 20 years of sustained resources to build
    healthy families and communities in our service area and to
    totally transfer service from an IHS crisis care model to a
    health prevention model. This must--and can only--be
    accomplished under tribal management with the flexibility
    Congress has allowed in the amendments to the Indian Self-
    Determination and Education Assistance Act demonstration model.
    We applaud Congress' vision and the tribal vision that made
    this Act a reality.
        We face daunting conditions. The 58 villages and 23,000
    people we serve are spread across an enormous, roadless area
    the size of South Dakota. Only snowmachine and subsistence
    trails, rivers and air transport systems connect our
    communities. Transportation during the long harsh winters is
    unpredictable. The majority of our people live below the
    poverty line. We estimate at least 54 percent are eligible for
    Medicaid insurance coverage; overall, 44 percent are
    unemployed, although in many villages the unemployment rate
    exceeds 80 percent. Most of our village homes have 6 gallon
    plastic buckets for toilets. Post-neonatal mortality is more
    than double the U.S. rate. Death by suicide is four times the
    national rate. Fetal alcohol syndrome and fetal alcohol effect
    are extraordinarily high, as are all other alcohol-related
    diseases, accidents and deaths. Hepatitis, tuberculosis,
    infections caused by lack of adequate sewer and water systems,
    and sexually transmitted diseases all plague our young and
    growing population.
        Attached to my testimony is a detailed profile of our
    health care organization and our region. As the profile
    reflects, we have succeeded in improving the health care
    delivery system since the days of IHS operation. But part of
    the reason we cannot do more today is that IHS has required us
    to neglect some programs and to divert resources to cover the
    fixed administrative overhead that necessarily comes along with
    operating a $40,200,476 system comprising 1,003 employees, 47
    village community health aid clinics, one mid-level subregional
    clinic, and a 51-bed hospital (including two new sub-regional
    mid-level clinics under construction).
        Our contract support cost requirement--what we need
    according to IHS policy, the DHHS Division of Cost Allocation
    and our certified annual audits--is $14,925,949. This is what
    we need to run our financial management systems, to operate our
    personnel, human resource and payroll systems, to support our
    facilities, to cover insurance, legal and audit costs, to
    operate our procurement system for drugs, equipment and
    supplies, to sustain our third-party billing operation, to
    support needed technology, to advance employee training, and to
    respond to new regulatory and legislative initiatives.
        But for several years we have operated with a multi-million
    dollar deficit in contract support costs, a deficit this year
    of $2,304,663--or fifteen percent (15%) below what we need (per
    Alaska Area CSC shortfall report 1/8/99). Keep in mind that
    this ``need'' has been determined by IHS and its sister agency
    the Division of Cost Allocation, not by us. Frankly, in our
    opinion it is artificially low. For instance, it understates
    greatly the need to at least match IHS's fringe benefit package
    when a tribal organization takes over the IHS system,
    especially for Commissioned Corps employees and Civil Service
    employees.
        The continual backlog in unpaid contract support costs has
    had serious consequences. Our accounting department is $212,050
    short, including three unfilled positions. Our billing and
    admissions departments are $321,375 short, including six
    unfilled positions. Technology support is short $236,700,
    representing three positions that support the remote
    telecommunications system that is the central nervous system of
    our health care operation. Hospital maintenance and
    housekeeping staff and equipment are down $477,430 to name just
    some of the areas where the shortage is causing reduced
    performance. We are unable to use IHS ``tribal share'' program
    funds for their intended purpose because much of the funds have
    been diverted to help close the contract support gap, funds
    which should be going to regional substance abuse services,
    mental health services, home health care and village clinic
    operations, and inhalant treatment, to name a few. In short,
    Mr. Chairman, the contract support cost shortfall for YKHC is
    very real, and it is causing very real damage to our ability to
    further improve the health status of our people.
        With this overview, we would like to make these additional
    points directed at the issues raised in the Chairman's letter:
    how to improve upon the system itself within the framework of
    the Indian Self-Determination policy.
        1. First, I cannot let this opportunity go without
    commenting on last year's proposal to reallocate all contract
    support costs on a simple flat pro rata basis.
        The flat pro-rata approach would have been a disaster for
    many tribes, and tribal organizations, across the country that
    have worked hard over the years to justify and secure the
    contract support funding they have. For us, our existing
    shortfall would have only gotten worse, causing massive layoffs
    in a region of Alaska already plagued by a fisheries disaster
    and low employment. Other tribal organizations that depend on
    the stability of a known contract support cost amount each year
    would have been hurt even more.
        If there is one thing I would hope to convey today, it is
    that last year Congress wisely rejected the proposal to
    redistribute all contract support on a flat pro rata basis. It
    is an approach that would have made Indian country shoulder the
    Federal Government's burden. It is an approach that was wrong
    despite its best intentions, and I hope the Chairman, and this
    distinguished Committee can assure all of us that it is an
    approach that will not be revisited.
        It is true that this system seems to work reasonably well
    for the BIA. But that is only how it appears. The fact is, the
    BIA system is peculiar indeed. Under that system, the BIA
    supposedly pays a tribe its full indirect costs the first year,
    along with its full start-up costs. But in the second year the
    tribe's payment can drop to 80 percent, 70 percent, or some
    other level no one knows until the BIA actually calculates it
    the following summer, just before the fiscal year is about to
    end. The BIA payment goes up and down with no predictability,
    causing considerable uncertainty for the tribes. In fact, I
    understand that this is a large part of the reason why the
    Interior Board of Contract Appeals threw out the BIA system. It
    ruled that if a tribe's contract calls for contract support
    costs, and the tribe is dutifully performing, and most of the
    year is over, the tribe must be fully paid. There is only one
    thing I can say for the BIA system: It is administratively
    convenient.
        The BIA system may help the BIA. But it does not help
    tribes. In contrast, the IHS system, although flawed by erratic
    appropriations, represents a genuine effort to maintain tribal
    stability by continuing to pay each tribal organization at
    least the same amount it received in the preceding year, again
    beginning with an effort to fully pay the tribe in the first
    year.
        Yes, the IHS system can be improved upon, especially with
    better coordination between Congress and the Tribes; but it is
    clearly a better systemz--assuming the goal is the stability of
    health programs serving needy Native Americans, and not
    administrative convenience.
        2. Second, we believe the Committee's concern regarding
    accurate data from IHS has been largely addressed in the past
    year. We are extremely impressed with IHS's commitment and
    progress in this area over a few short months, thanks to a
    needed centralization of much of this work, improved training
    of IHS Area personnel, and greater oversight from the IHS
    Office of Tribal Affairs and the Division of Financial
    Management. Candidly, we were one of many who said that IHS
    would never be able to bring accuracy back into its system and
    to negotiate all the contract support requests it had before
    it. But our skepticism was misplaced, and we give credit for
    this especially to OTA Director Doug Black and Deputy Director
    Ron Demeray, as well as Carl Fitzpatrick, Dan Cesari and Dan
    Modrano of the IHS Division of Financial Management.
        We do want to emphasize two points regarding the data
    issue. First, during last year's debate IHS furnished
    undistributed data to the Appropriations Committee staff. It
    was never publicized. Neither IRS nor anyone else shared that
    data with Indian country. It was finally provided to us by
    diligent Congressional staff during the heated debate; and,
    once it was received, we were able to show how terribly flawed
    the data was, and fortunately decisions based upon that poor
    data were abandoned. In the meantime, however, statements were
    made on the floor of the House and elsewhere that were plainly
    in error based on this false and misleading information.
        The point is this: the IHS and the Congress need to trust
    us. They need to share such vital information with us in
    advance, and at their own initiative, not ours. If the data
    withstands the harsh scrutiny of daylight, it can be the basis
    for informed decisions. Otherwise, Congress should step back
    and hesitate to act on an uncertain record that has not been
    tested.
        Indeed, even with all the good work IHS has done over the
    past few months, we continue to probe, to ask questions, to
    find flaws, to point out inaccuracies, and to prompt IHS to
    improve its data further. Tribal health care providers are now
    in partnership with IHS in this endeavor, and I have no doubt
    that IHS will readily acknowledge the value of our
    contribution. After all, we have a vested interest: if the data
    is called into question, the whole system may be called into
    question. And none of us can afford that outcome, least of all
    the thousands of Alaska Native people in the 58 villages we
    serve.
        3. Third, we share the Committee's interest in learning
    more about the issue of agency downsizing. While we at YKHC are
    not in a position to assess IHS's downsizing nationally, we do
    know that it has happened in the Alaska Area and in our own Y-K
    Delta Service Unit in Bethel.
        At the service unit level, there is no longer any IHS
    presence. Everything that was part of IHS has long been taken
    over by YKHC through our Compact with Congress. Of course, that
    does not mean IHS does not exist, for the hospital facility we
    operate is owned by IHS, and many of the professional staff we
    use are IHS employees detailed to us under the
    Intergovernmental Personnel Act and other applicable law. We do
    this because for many positions we simply cannot match the
    compensation benefit packages available to IHS for attracting
    qualified medical personnel, especially when it comes to
    Commissioned Corps personnel. So we leave those positions with
    IRS and we enter into agreements detailing those positions to
    YKHC. To that extent, then, IHS still has a vital local
    presence in the Yukon-Kuskokwim Delta.
        At the Area level, in 1994 we helped set into place a three
    year process for transitioning most of the Area Office
    operations to the Area's several tribal organizations and
    individual tribes. The process has worked well, and has been
    coordinated with the Alaska Native Tribal Health Consortium's
    and the SouthCentral Foundation's take over this year of the
    Alaska Native Medical Center. As a result of all these
    carefully planned efforts, the Area and ANMC staff working
    under the direction of IHS has shrunk from over 1,350 in 1994
    to about 40 today. We believe this example--the first
    experiment of its kind in the Nation under the Self-
    Determination Demonstration Act, involving the tribal
    administration of an entire Area and all its constituent
    service units--certainly demonstrates that IHS operations
    shrink as Congress permits tribes to step into IHS's shoes.
        On a national basis, the reduction of the IHS bureaucracy
    may be more difficult to see. For one thing, tribes have not
    been as consistently aggressive in the other IHS Service Areas
    in exercising their rights under the Indian Self-Determination
    Act in part due to the fact that they are not willing (or
    perhaps, more accurately, able) to take on services without
    adequate contract support appropriations, including start-up
    funds. Moreover, even where Self-Determination transfers have
    occurred, the reductions in the IHS system have often been
    balanced out by expansions in the overall system, thanks to
    desperately needed congressional attention to the terrible
    shortfalls in health care funding facing Indian country. For
    instance, in assessing IHS's reductions, it must be noted that
    Congress has increased the IHS service budget from $226 million
    in FY 1975, to over $1.84 billion in FY 1999. So, although 40
    percent of IHS may now be under tribal operation, the remaining
    60 percent is many times larger today than was the entire
    agency in 1975. In short, it may well be that far more analysis
    is needed to determine whether IHS is in fact a much smaller
    agency than it would otherwise be in the absence of the Indian
    Self-Determination Act.
        Nonetheless, one thing remains clear. In 1988 this
    Committee and the Senate Indian Affairs Committee observed that
    the IHS service bureaucracy had been gradually replaced with an
    oppressive contract monitoring bureaucracy. Since then,
    especially with the advent of the 1994 amendments, we have seen
    a real reduction at our Area level, and a corresponding
    transfer of functions to the tribal providers. But we still
    believe more can be done at the Headquarters level in this
    regard, and that Headquarters can and must also do a better job
    of freeing up all available Headquarters resources that support
    the system, including assessments paid to other agencies.
        As for other Area Offices outside our own, it is clear to
    us that IHS is indeed holding on to its empire in some
    quarters, and that it is often reluctant to turn over its
    operations to tribal control. This has been particularly
    evident in the Phoenix, California and Oklahoma Areas, and it
    is fair to say that IHS Headquarters has failed to bring
    necessary leadership and consistency to the various Area and
    Headquarters determinations regarding appropriate levels of
    noncontractible, so-called ``residual,'' ``inherently Federal''
    functions. Adding to this particular problem, IHS continues in
    some Areas to also withhold from tribal operation so-called
    ``transitional'' operations (this is so in the Portland and
    Oklahoma Areas, among others), despite the ruling of at least
    one Federal court that such actions are indefensible and
    contrary to the Self-Determination Act. This type of
    paternalistic approach has helped foster an ``us versus them''
    attitude and an attempt by some to divide Indian country and
    pit one region of the United States against another.
        In sum, we recognize that IHS has substantially downsized
    in response to the Self-Determination Policy, but agree that
    more along these lines can and must be done.
        4. Fourth, the Committee is correct that more can be done
    to accelerate the transfer of additional functions from IHS to
    the tribes. Under an IHS plan adopted two years ago, IHS now
    takes up to three years to transfer functions from Federal
    operation to tribal operation. This never used to be the case,
    and functions were always transferred within a matter of
    months. That's the way it was with the transfer of our Y-K
    Delta Regional Hospital. But this new plan, adopted at IHS
    insistence over the objection of many tribes, represents a
    serious retrenchment clearly intended to protect the Area and
    Headquarters offices. It is also directly contrary to the Act,
    which mandates that all IHS functions be paid to a contracting
    tribe as soon as the contract goes into effect.
        5. Fifth, we share the Committee's interest in learning
    more about how much the Federal Government really spends to
    support an IHS-operated clinic and hospital. However, we are
    skeptical this information can be reliably developed in the
    short term. After all, innumerable Federal agencies confer some
    benefit on IHS in one way or another, be it the Department of
    Justice (in prosecuting collection litigation, defending cases
    and other matters), the General Service Administration, the
    Office of Personnel Management, the Department of Treasury, the
    Veterans Administration (as in negotiating pharmaceutical
    contracts), the Equal Employment Opportunity Commission, the
    Federal Labor Relations Board, the Government Ethics Office,
    the Merit Systems Protection Board, the Government Printing
    Office--the list goes on and on.
        We assume the goal of such an ambitious study, perhaps
    better undertaken by the General Accounting Office than IHS,
    would be to provide some meaningful comparison between the true
    Federal costs of IHS administered care, and the total costs of
    tribally administered care, including contract support costs.
        Although the results of such a study would be enlightening,
    we respectfully suggest that such a study may ultimately be of
    limited use, particularly given its likely cost. For one thing,
    the Act and other Federal laws impose upon tribes financial
    obligations which do not burden IHS or any other branch of the
    Federal Government.
        For example, tribes undertake detailed annual audit reports
    on all their operations. IHS does not. Tribes carry costly
    property and vehicle insurance, casualty insurance, errors and
    omissions insurance and other insurance outside the scope of
    strict Federal tort claims. IHS does not. Tribes bring in
    outside risk managers to help secure and maintain accreditation
    and to administer sound programs. IHS does not. Tribes bear the
    costs of their governing bodies which develop tribal health
    care policy in the same way that Congress controls policy for
    IHS. IHS does not. Tribes renegotiate their compacts and
    contracts every year. IHS does not. A study of the true cost of
    Federal administration will miss these tribal-unique costs.
        But even more importantly, the Indian Self-Determination
    Policy was never designed as a way to save the Federal
    Government money. It was built with the goal of promoting
    tribal responsibility and accountability. The Act directed that
    Federal paternalism and oppression must end, and that
    Washington must stop dictating what is best for Indian country
    and what is best for the health care needs of Indian people.
    And to that extent the policy and its execution have been a
    resounding success. Having come so far from where we began, we
    must not now let ourselves be diverted from that success by a
    preoccupation with whose system costs less, especially given so
    many variables in program delivery and facility types.
        Nonetheless, we concur in the Committee's interest in
    exploring how tribes and IHS can be encouraged to maximize
    their efficiency in all operations. One way to do this is to
    guarantee to a tribe a stable flow of funding for a period of
    years. After all, maximizing efficiency first requires
    predictability and stability. If a tribe had a multi-year
    budget that was, in fact, actually funded, a tribe would be
    free to trim further its administrative overhead as much as
    prudently indicated, for the reward would be for the tribe to
    retain any savings, to be plowed back into expanded health
    care. IHS is already experimenting with this approach, known as
    the ``base budget'' approach, with several tribes, and the
    proposed permanent Self-Governance legislation would clarify
    IHS's authority to do so within the Self-Governance program.
    The Committee may wish to encourage IHS to explore the same
    avenue for ordinary contracting tribes.
        6. Sixth, the Committee has asked for comments on how
    tribes could further improve the availability of health care
    services within their existing budget limitations, and has
    particularly asked whether new authority or flexibility is
    needed to achieve this goal.
        At YKHC we have experimented with a number of recent
    innovations, and we would be pleased to share these innovations
    in greater detail with the Committee and other tribes. For
    instance, we have invested in staff housing so that we can
    attract and maintain professional staff and reduce the turnover
    that plagues most health care operations in Indian country. We
    have changed the way we do business for the extensive travel
    required as part of our health care delivery system, to further
    reduce costs and conserve our resources. We have created our
    own emergency air medivac system, in lieu of expensive private
    carriers. We have worked with city governments and commercial
    lending institutions to finance long term facility
    infrastructure using municipal bonds, saving millions in
    financing and interest. We are working cooperatively with the
    State of Alaska Department of Health and Social Services to
    maximize program delivery of early child intervention and
    developmental health programs as well as State funded substance
    abuse and mental health services. The Self-Determination and
    Education Assistance Act has proven beyond a doubt that when
    adequately funded, Tribes are the best health care providers
    not only for their own Native people, but for all members of
    our communities.
        These and other local innovations have helped us stretch
    our limited dollars far beyond IHS's ability. Our Tribes are
    proud and able to take the responsibility afforded them under
    our Compact with this Congress. All we ask is that Congress
    allow us the same resources you would want in providing health
    care to your own families.
        Substantial additional innovations will come with the
    enactment of the pending permanent Self-Governance legislation
    that I understand either has been or will be introduced this
    week. While the legislation is detailed, such detail is
    necessary if we are to overcome the barriers in Federal law and
    policy that make doing business much more expensive for tribal
    health care providers than it needs to be. Given the
    extraordinary scrutiny this legislation was given last year in
    the form of H.R. 1833, we respectfully hope the Committee will
    be able to move the new legislation rapidly to a mark-up early
    in the Session.
        Along similar lines, Title VI of the same proposed new
    Self-Governance legislation should eventually open the door to
    important new programs currently administered by the Department
    of Health and Human Services outside the authority of IHS.
    Title VI puts into place a study which hopefully will lead to
    additional legislation in the years ahead. While we would have
    preferred moving directly into a demonstration program with the
    Department, as originally proposed in H.R. 1833 as introduced
    last year, the Department has insisted that any demonstration
    program be preceded by careful study. Again, we hope this
    Committee will move swiftly on this important new bill.
        Finally, we are confident that tribes can bring
    considerably more resources into their systems, and can do so
    more efficiently, once the Medicaid demonstration program
    established in the Indian Health Care Improvement Act is
    expanded to all tribal health care providers, as now proposed
    in S. 406.
        7. We would like to close by commenting on the last topic
    identified by the Chairman, how to fund contract support costs
    today and in the coming years.
        This Committee helped give birth to the Indian Self-
    Determination Policy a quarter of a century ago. What we need
    today as tribal health care providers, first and foremost, is a
    resounding and unequivocal recommitment of the Nation to that
    policy. In the area of contract support costs, we respectfully
    believe that that commitment means fully funding existing
    contract support cost needs.
        It is important that the Committee understand fully the
    current situation. As things now stand, tribal health care
    providers are actually punished for operating IHS programs. If
    they want to operate an IHS program, if they want to take on
    responsibility for the program, if they want to realize
    improvements in the local health care delivery system, if they
    want to break the cycle of paternalism and dependency, there is
    a price: the tribes must finance their contract support cost
    shortfalls out of the program itself.
        This would not be acceptable even under ordinary
    circumstances, and circumstances here are far from ordinary.
    Already IHS programs are funded at between 40 percent and 60
    percent of need. Already, Indian health care is funded at less
    than half the national per capita expenditure on health care
    for other Americans. It is remarkable, to say the least, that
    under these circumstances tribes in our part of the country
    living in ``third-world conditions'' should be required to
    further reduce their programs in order to realize the benefits
    of improved health care and local autonomy that come with the
    Indian Self-Determination Act. IHS has provided the Committee
    with an estimate of the increase needed to fully fund contract
    support through FY 2000 (including inflation adjustments for FY
    1999 and FY 2000), and we respectfully urge the Committee to
    support a full increase in that amount in its communications
    with the Budget Committee and the Appropriations Committee.
        For the future, there is every indication that the rate of
    increase in contracting activities has now come down
    substantially, and will likely carry a contract support cost of
    between $10 million and $15 million for the Indian Self-
    Determination Fund funding each year. Proportionately, this is
    consistent with the size of the ISD Fund in the mid-1990s, and
    we therefore believe it is reasonable for Congress to commit to
    continue funding new contracts at that level for many years to
    come.
        Most importantly, we have been unable to identify any
    systemic problem either in the general Self-Determination
    process or in the specific contract support cost process. We
    therefore respectfully caution the Committee to reject
    recommendations that would revamp the Self-Determination Act in
    significant ways, such as by deferring new contract starts,
    deferring tribal entitlements to receive contract support, or
    otherwise weakening the Act's contract support cost provisions.
        Improvements, however, can certainly be made in how the Act
    has been carried out. For instance, IHS and BIA can report to
    Congress on a more timely basis the contract support cost needs
    anticipated both for the current year and the upcoming new
    year, so that Congress can more easily make corresponding
    adjustments in the supplemental and ordinary appropriations
    processes. While there is no indication that the contract
    support shortfall has been caused by a lack of information
    regarding its extent--a shortfall that has been regularly
    reported to Congress, the Secretary and OMB, and that has long
    been well-known--certainly more accurate, detailed and earlier
    reporting will lead to correspondingly better decisions here.
    Given the progress IHS has made in its data collection this
    year, working with the National Congress of American Indians
    and Tribal technicians, consultants, and Tribal attorneys, this
    is not an ambitious request.
        We also believe the agencies can do a better job of
    refining and standardizing the process for detennining contract
    support cost needs. The National Congress of American Indians
    is already looking into this area, and we look forward to
    NCAI's recommendations later this year. YKHC certainly supports
    standardization that is sensitive to areas of commonality among
    tribes, as well as being sensitive to the unique differences
    among us. After all, no one would quarrel with the fact that
    our contract support cost needs are necessarily higher given
    where we are located than an identically-sized program within a
    casual drive outside Phoenix, Minneapolis or Seattle.
        Finally, Mr. Chairman, we would ask that you and this
    Committee do everything possible to elevate the position of
    Director of Indian Health to the Assistant Secretary level--a
    tribal request that is long overdue.
        Mr. Chairman, we thank the Committee for the opportunity
    and honor of testifying today on an issue that is directly
    affecting the health and welfare of thousands of Alaska Native
    and non-native people back home, and of millions of Native
    American people across the country. We look forward to working
    closely with the Committee as it continues its examination into
    the Self-Determination contracting and compacting processes,
    and to exploring all avenues for continually strengthening both
    the Nation's Self-Determination policy and the ultimate
    delivery of the highest quality health care services possible
    to our people at home.

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       Statement of Lieutenant Governor Cecil Antone, Gila River Indian
                                   Community

    INTRODUCTION

        Good morning, Mr. Chairman and Members of the Committee. My
    name is Cecil Antone and I am the Lieutenant Governor of the
    Gila River Indian Community. I have had the privilege of
    serving as Lieutenant Governor since I was first elected in
    1993. I am honored to have the opportunity today to represent
    the Gila River Indian Community before the Committee to discuss
    Federal funding for contract support costs associated with
    health care programs in Indian Country (``Contract Support
    Costs''). This is an issue of vital importance to the health
    and welfare of our Community members, as well as members of the
    Nation's other Indian tribes.
        The Gila River Indian Community (the ``Community'') is
    located on 372,000 acres in south central Arizona. Our
    Community is composed of approximately 19,000 tribal members,
    13,000 of whom live within the boundaries of the Reservation.
    We have a young and rapidly growing population that presents us
    with a variety of health care challenges, now and in the
    future.
        It is appropriate that the Committee has asked the
    Community to testify at today's hearing. Although our
    Community's experience with Contract Support Cost funding
    exposes some of the weaknesses of past funding practices, it
    also illustrates the significant rewards that can result when
    Indian tribal governments embrace the self-determination policy
    articulated in the Indian Self-Determination and Educational
    Assistance Act (``ISDEA'') by taking over operation of health
    care programs. We believe our story has both lessons to teach
    and hope to give in reaching a lasting solution to the Contract
    Support Cost funding issue.
        We have attempted in this testimony to provide the
    Committee with our views with respect to the questions it has
    posed to the Indian Health Service (``IHS'') about Contract
    Support Costs. We have tried to answer those questions in the
    context of the story we have to tell about our experience with
    Contract Support Cost funding.

    THE CONTRACT SUPPORT COST ISSUE

        I would like to take the opportunity to briefly present
    some background on the role of Contract Support Cost funding in
    the successful implementation of self-determination policy. Our
    Community believes strongly that anything less than full and
    recurring funding of Contract Support Costs compromises the
    fundamental purposes underlying the Federal policy of tribal
    self-determination. We believe that Congress and the
    Administration understand this, as well. More than a decade
    ago, the United States Inspector General concluded that the
    Federal Government's payment of Indian tribal governments'
    Contract Support Costs enables Indian tribal governments to
    improve their administrative capacity and comply with Federal
    requirements applicable to the operation of their health care
    programs.\1\ The Committee Report that accompanied the 1988
    amendments to ISDEA went on to state as follows:
    ---------------------------------------------------------------------------
        \1\ S. Rep. 100-274 at 11.

            The use of indirect costs is widely accepted by state, county
            and local governments, and by universities, hospitals and
            nonprofit organizations. The most relevant issue is the need to
            fully fund indirect costs associated with self-determination
            contracts. The [Administration] should request the full amount
            of funds from the Congress that are adequate to fully fund
            tribal indirect costs. Furthermore, the Bureau of Indian
            Affairs and the Indian Health Service must cease the practice
            of requiring tribal contractors to take indirect costs from the
            direct program costs, which results in decreased amounts of
            funds for services.\2\
    ---------------------------------------------------------------------------
        \2\ Id. at 11-12.
    ---------------------------------------------------------------------------
        Contract Support Cost funding is absolutely crucial to the ability
    of Indian tribal governments to operate health care programs
    transferred to them by IHS because those funds cover the ``overhead''
    and other administrative costs that Indian tribal governments incur in
    operating contracted Federal programs. Examples of such costs include
    personnel, audit, financial and property management services.
        In some cases, full funding for these functions cannot be
    transferred from the IHS to Indian tribal governments because the
    function is provided by a Federal agency outside the IHS. For example,
    the Department of Justice and the Department of Health and Human
    Services Office of General Counsel provide IHS with legal services, the
    Office of Personnel Management provides IHS with personnel support and
    training, and the Office of Management and Budget provides IHS with
    budget and program policy formulation and analysis.
        In other cases, IHS cannot transfer full funding for such functions
    because the costs are not incurred by IHS at all, but Indian tribal
    governments must incur the cost to operate the program. Examples of
    such costs include liability insurance and audit costs. When the IHS
    cannot directly transfer necessary resources to Indian tribal
    governments to support a function required by contracts with IHS, IHS
    is required by ISDEA to provide the Indian tribal government with
    Contract Support Cost funds to cover these costs.
        As the Committee is aware, there is a long history of inadequate
    funding of Indian tribal governments' Contract Support Costs. Congress
    made specific amendments to ISDEA in 1988 and 1994 to remedy this
    problem by requiring the IHS to add to the amount available for direct
    program costs the full amount of Indian tribal governments' Contract
    Support Cost need. Nonetheless, inadequate appropriations have remained
    a significant obstacle to realizing the self-determination mandate. The
    sad result is that every un-funded dollar of Contract Support Costs
    must be compensated for by Indian tribal governments by reducing their
    level of effort to maintain administrative systems or by reallocating
    funds for patient services to pay administrative costs--a result ISDEA
    and its amendments specifically sought to avoid. In the present
    environment of inadequate funding for Indian Health Services, funding
    for tribal health services cannot be further diverted without having a
    severe impact on health care status.
        The $35 million that was appropriated for Contract Support Costs in
    Fiscal Year 1999 was a significant accomplishment, but we must continue
    our work to find a reasonable, lasting solution that recognizes the
    validity and necessity of full and recurring Contract Support Cost
    funding to the realization of the goals of tribal self-determination.
    Any such solution must acknowledge that increases in Contract Support
    Cost funding are imperative and unavoidable if the true promise of the
    self-determination policy is to be realized.

    THE SUCCESS OF TRIBAL HEALTH CARE PROGRAMS AND SERVICES

        I would like to turn now to the success of the policy of Indian
    self-determination. Tribal leaders have testified consistently
    throughout the years to the importance of the self-determination policy
    in building local programs and administrative infrastructure. In
    oversight hearings conducted in the Spring of 1987, for example, tribal
    leaders testified that through self-determination, Indian tribal
    governments experienced greater utilization of services, increased
    stability in tribal government and communities, and a greater focus on
    tribal economic development. Our Community's experience has been the
    same.
        Since the Community assumed local operation and management of
    health care services through our Department of Public Health and the
    Gila River Health Care Corporation (``the Corporation''), our Community
    has expanded and improved services in many ways. For example, we have
    restored services that IHS was forced to eliminate due to inadequate
    funding in the early 90's and we have changed aspects of health care
    delivery to be more responsive to Community members.
        These changes have resulted in increased outpatient visits and a
    redirection of services to target our Community's most serious health
    needs. We have made these improvements despite operating the largest
    component of our health care system--the Corporation--for three (3)
    years with no Contract Support Cost funding and our Department of
    Public Health at less than full funding. The Corporation alone has
    absorbed between $2 and $3 million in un-funded costs in each of the
    last three years.
        The program funding we ``lost'' as a result of having to absorb
    Contract Support Costs was requested and appropriated by Congress to be
    used to provide health care services to our Community. Moreover, it is
    important to remember that the IHS program funding that is made
    available to Indian tribal governments is 2/3 less than the average
    U.S. per capita expenditure for health care services for the rest of
    the Nation. Indian tribal governments are forced to stretch already
    limited health program dollars even farther when Contract Support Costs
    are not covered by adequate appropriations.
        Our Community, fortunately, has been able to keep the level of
    health care service constant due to the increased control its exercises
    over program dollars. This control was formerly in the hands of the IRS
    bureaucracy. We have also increased our third party collections and
    received some funds from other Community sources to support increased
    health care services to our members. However, even after re-investing
    these additional resources into our program, our total funding provides
    approximately $1,400 per patient--well below the national average of
    $3,046 per patient. Thus, although our Community has achieved far
    greater efficiencies than the IHS in utilizing scarce Federal
    resources, the fact remains that under-funding Contract Support Costs
    requires our Community to use funds appropriated for services for
    administrative costs that are not only legitimate and reasonable, but
    legally required by our contracts with IHS.
        Despite operating under less than ideal conditions, we believe we
    have made impressive strides in improving health care services, which
    indicates to us the promise inherent in the policy of self-
    determination. For example, our Community, like many other tribal
    communities, is facing the challenge of a serious diabetes epidemic.
    The social cost of diabetes in our Community is staggering The
    incidence of type 2 diabetes exceeds 50 percent in our adult
    population, with an additional 10 percent of our members having
    impaired glucose tolerance. Our children are not immune from this
    epidemicz--over 70 children under age 18 have full-blown type 2
    diabetes, which, prior to 1998, was rarely reported in the medical
    literature in children of this age group.
        Among the many serious complications of diabetes is gangrene of the
    limbs, which often results in amputations. In 1988, with no podiatrist
    on the staff of the IHS hospital, there were twenty (20) lower
    extremity amputations in our Community. In the last few years, with two
    full-time podiatrists and a residency program in podiatry we have
    reduced the number of amputations to between three and five per year.
    While this is a significant improvement, our podiatrists need improved
    and immediate access to surgical facilities to further reduce and
    hopefully eliminate lower extremity amputations in our population.
        Gum disease is another diabetes-related condition, which if left
    untreated can result in complete tooth loss. Our Community's dental
    program now provides enhanced periodontal care for patients with
    diabetes. Our diabetes patients are given immediate access to
    appointments for examination and diagnosis and are treated utilizing a
    specialized protocol developed at our facility. Treating patients with
    this protocol has produced improvements in diabetes management as
    measured by glycosolates hemoglobin levels.
        With over 3,000 individuals in our diabetes registry, the cost of
    providing care continues to increase. Almost 150 of our patients are on
    dialysis, awaiting renal transplantation. Pharmacy costs also continue
    to increase at a rate that exceeds 18 percent per year as newer agents
    (such as troglitazone) are necessary to improve the management of
    diabetes and forestall the progression of microvascular disease and its
    effect on the kidney, heart, eye, and peripheral vascular systems.
        In an effort to combat the severe diabetes epidemic within our
    population, the Community is currently pursuing a multi-disciplinary
    Center for Excellence for culturally appropriate approaches to the
    prevention of diabetes. Our Community would support special assistance
    by Congress to Indian tribal governments contemplating such initiatives
    to target the most severe health care problems plaguing Indian
    populations as an incentive for further health care improvements within
    tribal health care programs.
        In addition, the limited Contract Support Cost dollars that our
    Department of Public Health has been receiving through its separate
    contracts with IHS have helped to build our health care delivery
    infrastructure. These Contract Support Cost funds, although funded at
    much less than 100 percent of need, have helped us create an additional
    executive position to further improve the management of the numerous
    health care programs within the Department. In addition, our Alcohol
    and Drug Abuse Program has been able to hire additional counselors.
    Other public health programs within the Community have also been able
    to increase services for the benefit of the Community, such as through
    hiring additional staff.
        We are beginning to convert the Department of Public Health from an
    underfunded and overworked tribal health care agency into a public
    health agency that we believe can rival the best local and state
    programs. So far, we have measured the improvements in Department of
    Health programs in small steps, and there remains a long way to go. In
    October 1998, we began to examine the infrastructure that was needed by
    our Community to develop and maintain the necessary databases to
    monitor the public health status of Community members. This type of
    tribal-specific health information is not kept by national databases
    and is essential to monitoring long-term health statistics of our
    Community members. We are also developing an Intergovernmental
    Agreement between the Community and the State of Arizona dealing with
    areas of mutual concern and cooperation on areas of health. In this
    respect, the Department of Public Health, through its self-
    determination efforts, has already greatly exceeded the prior efforts
    of IHS.
        Perhaps most importantly, since taking over operation of certain
    health care programs, the Department of Public Health has been able to
    locate essential services, such as Well Child Clinics, a Wellness
    Center, Alcohol and Drug Abuse Program Counseling, Public Health
    Nurses, Community Health Representatives, and emergency medical
    vehicles, at accessible locations throughout our Community. These
    Community-based services were not even contemplated by the IHS.
        These tremendous strides in health care service improvements by our
    Community have been made at the same time that significant cost savings
    have been achieved through the assumption of local operation of
    administrative functions. Examples include the ability to enter into
    contracts directly with outside service providers, typically at reduced
    rates based on our ability to pay invoices on time, and to hire needed
    personnel directly rather than going through the MS Area Office Federal
    personnel system, under which we had to wait an excessively long time
    and often accept less than ideal candidates.

    THE COMMUNITY'S EXPERIENCE WITH CONTRACT SUPPORT COST FUNDING

        I would now like to discuss in more detail the Community's
    experience with the under-funding of Contract Support Costs during the
    last three (3) years to highlight some of the problems we have
    encountered. In June of 1995, as the Community was preparing to
    contract with IHS to assume operation and management of the Community's
    Hospital, our Community submitted a Contract Support Cost request of $4
    million.
        Because of the IHS practice of utilizing a ``queue,'' or waiting
    list, for un-funded self-determination Contract Support Cost requests,
    our request was placed on the Indian Self-Determination queue (``ISD
    queue'') and we waited for funding. Each year we did not receive
    funding and but continued to track and refine our Contract Support Cost
    request. Eventually, our requests made it close to the ``top'' of the
    ISD queue and we would have been funded at 100 percent in Fiscal Year
    1999 if the ISD queue system had continued as it was operated in the
    past.
        However, despite a backlog estimated at over $60 million in un-
    funded Contract Support Cost requests, the Administration requested no
    new funds for the ISD queue in Fiscal Year 1999. After a massive effort
    by Indian tribal governments and tribal supporters in Congress, $35
    million in new funding was included in the Fiscal Year 1999 IHS
    appropriation. We understand that this will allow both our Department
    of Public Health and Health Care Corporation to receive approximately
    70 percent of our Fiscal Year 1999 request.
        Although we will not receive our anticipated 100 percent Contract
    Support Cost funding in Fiscal Year 1999, we support the proposed
    method of allocating the $35 million in new funding because we believe
    it goes along way toward bringing all Indian tribal governments closer
    to meeting their Contract Support Cost need. However, under the
    proposed allocation methodology, another $1.2 million of our IHS-
    approved Contract Support Costs will not be funded in Fiscal Year 1999.
    This brings our total un-funded Contract Support Costs over the last
    four (4) years to between $8 and $11 million.
        While Section 314 of the Fiscal Year 1999 IHS appropriations bill
    expresses the view that Indian tribal governments should not be able to
    collect these past due amounts, we believe this view simply invites
    needless litigation and would be better addressed jointly by Congress,
    the Administration, and Indian tribal governments discussing this issue
    to reach some consensus on how to address this past liability. In this
    regard, we need a firm commitment from Congress and the Administration
    that they will continue to strive to address our past un-funded costs
    and to reach and maintain 100 percent funding for the future.

    THE NEED FOR ACCURATE CONTRACT SUPPORT COST DATA

        If Congress is to commit to reaching and maintaining 100 percent
    Contract Support Cost funding, they obviously need more accurate
    Contract Support Cost estimates for appropriations purposes. With
    respect to that issue, I would now like to discuss the Committee's
    concern about the lack of accurate and complete data relating to
    current and projected future Contract Support Costs during the last
    appropriations period.
        As Committee Members are aware, during the Fiscal Year 1999
    appropriations period, there was much discussion about how the $35
    million in new funding would be allocated among the Indian tribal
    governments. That complex debate was made significantly more difficult
    due to the lack of firm Contract Support Cost numbers from IHS.
        We believe the past practice of maintaining a queue and expecting
    that only the top $7.5 million in requests would be funded each year
    very likely contributed to the lack of accurate information concerning
    the real Contract Support Cost need for all Indian tribal governments
    contracting with IHS. IHS apparently did not feel compelled to
    scrutinize and finalize queue requests until an Indian tribal
    government was nearing the top of the queue. The Contract Support Cost
    debate during the Fiscal Year 1999 appropriations cycle required
    accurate numbers for all Indian tribal governments on the queue and
    highlighted the importance of accurate and thorough information.
        IHS, and particularly the Office of Tribal Programs and Finance
    staff, should be commended for their efforts in the past six (6) months
    toward getting a handle on current Contract Support Cost needs and
    projecting the additional funds needed to remedy the remaining
    shortfalls. Now that a significant portion of the hard work has been
    done, it is critical that IHS Headquarters work with the Area Office
    staff to keep the information updated and accurate and to work more
    closely with Indian tribal governments to get their future Contract
    Support Cost needs sufficiently in advance.

    REDUCTIONS IN IHS

        With respect to the Committee's inquiries concerning the
    feasibility of further reductions in IHS bureaucracy, we do not believe
    it is necessarily possible for IHS to make parallel reductions in the
    IHS with each self-determination contract it enters. We would, however,
    like to see a dynamic change in the function, direction, and
    organization of the agency as more Indian tribal governments provide
    their own health care services. For example, in the Phoenix Area, many
    Indian tribal governments, unlike our Community, operate their public
    health programs and IHS provides the direct care.
        Under the present system, these Indian tribal governments continue
    to need the support of an Area Office focused on the provision of
    direct care. At the same time, our Community no longer needs or
    utilizes these IHS program support functions, and where we do need such
    support, we generally hire appropriate personnel or contract with
    consultants who have the required private-sector expertise.
        To support our programs, we need the IHS to work with us in a true
    government-to-government partnership to timely and cooperatively
    provide us with information pertinent to our Federal funding for which
    it is the conduit. There should be some corresponding reduction of
    effort within the IHS resulting from the change in services and
    functions that are provided by an Indian tribal government under a
    self-determination contract. We support Federal legislation that would
    provide a reduction in IHS administration, consistent with the goals of
    ISDEA policies, so long as the diverse and unique needs of all Indian
    tribal governments are considered in any such plan.
        We also acknowledge that significant barriers to downsizing IHS
    exist. For example, any legislation mandating reductions will have to
    take into account Federal employment laws and how they affect the
    agency taking reductions commensurate with the functions that have been
    contracted.
        As a related matter, we strongly support legislation to make self-
    determination permanent within the IHS, given the demonstrated success
    of the self-determination policy. Such legislation would be similar to
    H.R. 1833, co-sponsored by Chairman Young and passed by the House in
    the 105th Congress, which would have permanently established and
    implemented tribal self-governance within the Department of Health and
    Human Services.

    ACHIEVING THE HIGHEST LEVEL OF HEALTH CARE

        Aside from reducing or reorganizing IHS, we have other suggestions
    as to how to achieve the highest level of tribal health care possible.
    For example, we believe that higher levels of health care would result
    from more consistent and reasonable application by IHS of the rules
    governing what is included in the indirect cost pool for determining
    indirect cost rates for Indian tribal governments. Currently, an
    unintended penalty is imposed on certain Indian tribal governments by
    the large differences in indirect cost rates negotiated by the
    Inspector General.
        Indian tribal governments like ours with lower indirect cost rates,
    often due to economies of scale, receive proportionately less of the
    available Contract Support Cost dollars as a result. The effect is that
    the most efficient Indian tribal governments receive a proportionately
    smaller portion of available Contract Support Cost dollars. Our
    Community has, comparatively, a very low indirect cost rate of about 13
    percent, compared to rates close to 100 percent for other Indian tribal
    governments. Therefore, we would support efforts by IHS to apply a more
    consistent and reasonable methodology to the determination of costs
    included in the indirect cost pool, recognizing of course the diverse
    needs of Indian tribal governments.
        With respect to the Committee's request for suggestions for the
    removal of barriers to efficient health care delivery by Indian tribal
    governments in order to achieve the highest level of tribal health
    care, our Community would support agency assistance for Indian tribal
    governments in accessing other Federal programs that can bring in
    additional funds, such as those within the Centers for Disease Control
    and Prevention and the Office of Minority Health.
        We also have some ideas in response to the Committee's request for
    suggestions to increase flexibility in the administration of local
    health care programs. Our Community's health care programs would
    benefit, for example, from access to the Federal Health Care
    Professions Fund, from which the agency currently excludes Indian
    tribal governments from participation. Access to the Fund would allow
    Indian tribal governments to identify and recruit candidates from the
    tribe to send to medical or business school to assume medical or
    executive positions within the operation of the local health care
    programs. The recruitment of tribal members for long-term employment
    within tribal health care operations is a proven way to ensure the
    long-term stability of tribal health care programs. In addition,
    currently the IHS's Prime Vendor Program requires the Corporation to
    purchase drugs through IHS. The Community's ability to purchase drugs
    on its own would result in increased cost savings and efficiency.
        Although we do not have the opportunity to fully develop these and
    other ideas in this testimony, they may be worth exploring further in
    another context in an effort to further improve the efficient delivery
    of tribal health care services.

    HEALTH CARE DELIVERY ALTERNATIVES

        With regard to Indian tribal governments that strive for the
    highest health care possible but choose not to contract with IHS for
    local operation of health care programs, we believe it would be helpful
    if non-contracting Indian tribal governments had more authority to tell
    IHS what programs they would like to see IHS put in place to meet the
    specific health care needs of tribal members. Other mechanisms, such as
    meaningful tribal participation on IHS service unit governing boards,
    would assist in improving care and meeting the needs of tribal
    communities where a tribe does not choose to contract directly.
        It is important not to lose sight of the fact, however, that new
    approaches to the delivery of health care cannot replace the urgent
    need for increases in Contract Support Cost and program funding. What
    Indian tribal governments need now before anything else is a firm
    commitment from the Administration and Congress new funds will be made
    available on a recurring basis to meet existing needs. Even among
    Indian tribal governments with dramatic records of health care
    improvement, there is much more to be done and much more could have
    been done had the Indian tribal governments received the full 100
    percent Contract Support Cost funding to which they are entitled. The
    first priority, then, should be to add to the IHS budget to give Indian
    tribal governments 100 percent of their Contract Support Cost and
    program needs so that necessary improvements in services can be made.

    MORATORIUM

        Finally, in addition to ensuring full and recurring Contract
    Support Cost funding for Indian tribal governments that currently have
    operating programs, it is vital to the policy of self-determination
    that Indian tribal governments have the continued right to enter into
    self-determination contracts in order to take over administration of
    health care programs and services. That is why we fully support lifting
    the 638 contract moratorium applied by Congress this past year on any
    new and expanded 638 contracts. The moratorium is a direct affront to
    the right of self-governance and self-determination provided to Indian
    tribal governments under ISDEA and is not a long-term solution to
    Contract Support Cost funding issues.

    CONCLUSION

        These are just a few of the examples we can offer of the promise
    that tribal administration of health programs holds for improving the
    health and welfare of Indian people throughout the Nation. In order for
    the full promise of ISDEA to be realized, however, Congress must commit
    to a plan to increase funding for Contract Support Costs to an extent
    that will allow full and recurring funding for Contract Support Costs
    in future years.
        The Gila River Indian Community believes strongly that the
    Administration, Congress, and Indian tribal governments working
    together can find a way to improve the mechanism for providing needed
    Contract Support Cost funding to Indian tribal governments. The reward
    will be increases in health care improvement and efficiencies in the
    operation of tribal health care programs throughout the Nation.
        The first priority must be increasing the funding available to
    Indian tribal governments for Contract Support Costs to reach the goal
    of full and recurring Contract Support Cost funding. To that end, we
    seek a firm commitment from Congress that it will seek an increase in
    the money available to Indian tribal governments to cover Contracts
    Support Costs now and in the future.
        We appreciate that IHS has made significant progress in addressing
    these issues in recent months. We encourage Congress, however, to
    remain committed to increasing Contract Support Costs not only within
    the IHS budget, but also within the Bureau of Indian Affairs budget. In
    addition, any proposed congressional solution to Contract Support Costs
    should address in a consistent manner Contract Support Costs within the
    IHS and the BIA, as well as any other Federal agency that impacts
    Indian programs.
        What our story and that of other Indian tribal governments
    demonstrates is that tribal contractors will do best when they are
    given the funding they need and work in a true government-to-government
    relationship to create solutions to their unique health care
    challenges. Indian tribal governments have proven that the self-
    governance framework can build tribal administrative capacity, reduce
    bureaucracy, save money, and, most importantly, improve the quality of
    health care services to tribal members. It is now up to all of us to
    find a lasting solution to Contract Support Cost funding that honors
    the Nation's commitment to Indian tribal governments.

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