[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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