[Senate Hearing 110-519]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 110-519

          ACCESS TO CONTRACT HEALTH SERVICES IN INDIAN COUNTRY

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

                                HEARING

                               before the

                      COMMITTEE ON INDIAN AFFAIRS
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 26, 2008

                               __________

         Printed for the use of the Committee on Indian Affairs



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                      COMMITTEE ON INDIAN AFFAIRS

                BYRON L. DORGAN, North Dakota, Chairman
                 LISA MURKOWSKI, Alaska, Vice Chairman
DANIEL K. INOUYE, Hawaii             JOHN McCAIN, Arizona
KENT CONRAD, North Dakota            TOM COBURN, M.D., Oklahoma
DANIEL K. AKAKA, Hawaii              JOHN BARRASSO, Wyoming
TIM JOHNSON, South Dakota            PETE V. DOMENICI, New Mexico
MARIA CANTWELL, Washington           GORDON H. SMITH, Oregon
CLAIRE McCASKILL, Missouri           RICHARD BURR, North Carolina
JON TESTER, Montana
      Allison C. Binney, Majority Staff Director and Chief Counsel
     David A. Mullon Jr., Minority Staff Director and Chief Counsel








                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on June 26, 2008....................................     1
Statement of Senator Barrasso....................................     9
Statement of Senator Dorgan......................................     1
Statement of Senator Johnson.....................................     8
Statement of Senator Murkowski...................................     7

                               Witnesses

Dixon, Hon. Stacy, Chair, Susanville Indian Rancheria............    35
    Prepared statement...........................................    38
Holt, Hon. Linda, Chair, Northwest Portland Indian Health Board..    48
    Prepared statement with attachments..........................    51
Keel, Hon. Jefferson, Lieutenant Governor, Chickasaw Nation; 
  First Vice President, National Congress of American Indians....    43
    Prepared statement...........................................    45
Krein, Marlene, President/CEO, Mercy Hospital....................    32
    Prepared statement...........................................    33
McSwain, Hon. Robert G., Director, Indian Health Service, U.S. 
  Department of Health and Human Services; accompanied by Dr. 
  Richard Olson, Director, Office of Clinical and Preventive 
  Services, and Carl Harper, Director, Office of Research Access 
  and Partnerships...............................................   113
    Prepared statement...........................................   115
Shore, Brenda E., Director of Tribal Health Program Support, 
  United South and Eastern Tribes, Inc. (USET)...................    95
    Prepared statement with attachments..........................    98
Smith, Sally, Chair, National Indian Health Board................    11
    Prepared statement with attachments..........................    13

                                Appendix

Antonio, Sr., Hon. John E., Governor, Pueblo of Laguna, prepared 
  statement......................................................   125
Chavarria, Hon. J. Michael, Governor, Santa Clara Pueblo, 
  prepared statement with attachments............................   141
Cooper, Casey, Chief Executive Officer, Cherokee Indian Hospital, 
  prepared statement.............................................   131
Letters submitted for the record............................... 203-291
Marchand, Hon. Michael E., Chairman, Confederated Tribes of the 
  Colville Reservation, prepared statement.......................   129
Rhoades, Everett R., MD, Consultant, Southwest Oklahoma 
  Intertribal Health Board, Discussion Paper entitled, Contract 
  Health Services--A Growing Crisis in Health Care for American 
  Indians and Alaska Natives.....................................   292
Revis, Tracie, Second Year Law Student, University of Kansas, 
  prepared statement.............................................   133
Shirley, Jr., Dr. Joe, President, the Navajo Nation, letter, 
  dated April 30, 2008 to Hon. Byron L. Dorgan...................   137










 
          ACCESS TO CONTRACT HEALTH SERVICES IN INDIAN COUNTRY

                              ----------                              


                        THURSDAY, JUNE 26, 2008


                                       U.S. Senate,
                               Committee on Indian Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10 a.m. in room 
562, Dirksen Senate Office Building, Hon. Byron L. Dorgan, 
Chairman of the Committee, presiding.

          OPENING STATEMENT OF HON. BYRON L. DORGAN, 
                 U.S. SENATOR FROM NORTH DAKOTA

    The Chairman. I am going to begin the hearing. Our Vice 
Chair, Senator Murkowski, will be here shortly and other 
members of the Committee will be joining us this morning. In 
the interest of time, I want to begin the hearing.
    I am Senator Dorgan. This is the Senate Committee on Indian 
Affairs. We have a hearing today on a very important subject 
called Contract Health Services in Indian Country.
    As you know, the Contract Health Service is a very 
significant and vital part of Indian health care. The program 
is crucial to providing the full range of health care services 
to individual Indians.
    In March of this year, I sent out a letter soliciting 
tribal leaders for their thoughts on the current system. In 
response, the Committee received dozens of letters. This is the 
stack of letters I received, from reservations across the 
Country, describing their experience with contract health 
care--all of them indicating that the system is broken.
    One of the main concerns raised is inadequate funding, 
which leads to denials and rationing of health services. I am 
putting up a chart that shows the Contract Health Service is 
only funded at about 50 percent of need. The black represents 
the amount of health care that is funded. The grey represents 
the amount of health care that is unmet and that is lacking 
with the current funding of Contract Health care.



    The program is funded at about $580 million at this point. 
It is estimated that $1.3 billion would be necessary to meet 
the current need. This level of funding results in full-scale 
rationing, which should be a news headline across this Country. 
Rationing is scandalous and ought to produce headlines, but it 
doesn't because it goes on every day.
    Chart two shows what Indian health considers to be 
priority-one matters. In these situations, services are 
necessary to prevent death or serious harm. I don't think you 
will be able to see all of that, but category one, or priority 
level one, is acutely urgent care. We will talk about category 
one in a moment.



    The current levels of funding often do not cover the need 
even for priority-one cases; this means that categories two 
through four, you don't even talk much about since we can't 
even meet priority-one cases. Priority two, as you will see, 
deals with mammograms, cancer screenings, knee replacements, 
some organ transplants. You would expect category two to be 
very significant, but in many cases clinics don't even get to 
category two because they can't afford to fund category one.
    Chart three illustrates the number of life or limb denials 
for contract health care and how they continue to increase. 
These are what are called non-priority denials, and you will 
see the line which shows a very substantial increase in the 
number of denials.



    I think the process for getting approval and the level of 
denials is out of control. These are necessary services, 
promised services as a result of a trust responsibility. 
Denying these services harm the lives of hundreds of thousands 
of Native Americans.
    One young woman recently shared with us her experience. I 
want to share it with you and I do that because she allowed us 
explicitly to do it. Otherwise, I would certainly not. But this 
is Tracie Revis, who is a member of the Creek Nation in 
Oklahoma. In 2005, she was at law school in Kansas. She was 
diagnosed with pneumonia at the local Indian Health Service 
clinic. Her situation didn't improve, so she went back home for 
additional care. The IHS clinic told her that she had to go 
home to the clinic at the nearest reservation in Oklahoma, so 
she left school and went home.



    In Oklahoma, the IHS clinic referred Tracie to a specialist 
to get a biopsy on a mass that was discovered in her sternum. 
During the biopsy, the surgeon found a six-inch cancerous 
tumor. At that time, the surgeon decided to cut out three-
quarters of that tumor. She had not received prior approval, 
however, for the additional surgical service. Because of this, 
the Contract Health Service denied coverage for the surgery. 
That resulted in Tracie being personally responsible for paying 
$25,000 in additional costs.
    She then went back to the Contract Health program to get 
approval for chemotherapy. It took three months to get 
approval. In that time, the tumor tripled in size. 
Additionally, the facility that Tracie was referred to for 
chemotherapy did not want to treat her because there was a 
history of non-payment by the Indian Health Service. After a 
long battle, the facility finally decided to treat her.
    Over the next year, Tracie would go back to work where she 
was able to get private insurance. Although her cancer 
returned, she was able to get necessary treatment, get coverage 
for it, and I am pleased to say this young woman is now cancer-
free and back in law school. But the entire experience has left 
her with a $200,000 debt, because Contract Health program would 
not meet the obligations to her.
    I hope she is not embarrassed if I point out that Tracie 
Revis is in the room. Tracie, would you stand?
    [Applause.]
    The Chairman. Tracie, thank you for sharing your story. It 
is an important story because it describes so much of what we 
need to fix.
    Finally is the story of Russell Lente. His doesn't quite 
have the same ending, but I want to tell you the story because 
it was described to us by people who want the story to be 
known. Russell was a young, talented artist from Isleta Pueblo 
in Mexico. He loved to paint. Russell's creative works are 
featured on billboards and murals and skateboards even now. He 
recently lost his battle with cancer at age 23.



    When he found out he had cancer, he sought early treatment 
to help him fight the disease, but Contract Health Service 
denied Russell these services. Although he had cancer, the 
disease had not progressed to a stage where it was determined 
that it would be considered priority one, which we all know as 
``life or limb''. I don't understand that. There is something 
wrong with a system that suggests that almost any cancer is not 
somehow priority one or ``life or limb''. But Russell's story 
ends at age 23, regrettably.
    A talented young man is lost to all of us, and his story 
again describes why we need to fix this system. This 
illustrates the problems faced by tribal members and by Indian 
communities. It is my hope that this hearing will give voice to 
those affected by the system, those in the system, those 
providers--some of whom provide the care even though they are 
not reimbursed for it because they know Contract Health is not 
going to pay, but they will assume the cost and eat the cost.
    We, as you know, have passed an Indian Health Care bill 
through the Indian Affairs Committee thanks to the excellent 
work of the Vice Chair, Senator Barrasso, Senator Johnson, 
Senator Tester and so many others. It has been passed through 
the entire Senate. We are now waiting for the House to pass an 
equivalent bill so we can go to conference.
    This is but a first step. We must adequately fund, and we 
must make Contract Health Services work. The stories I have 
described today demonstrate it does not work. There are some 
success stories, but there are far too many failure stories in 
a circumstance where about half of the money that is needed is 
not available. So you have full-scale rationing of health care 
for Indians.
    We have two panels today because we have many witnesses. I 
am going to call on others for brief statements, but I wanted 
to say that the witnesses have been asked, as is always the 
case and has always been the case, for a five-minute summary of 
their full written statements. The full written statements, of 
course, will be made a part of the permanent record.
    So let me call on the Vice Chair, Senator Murkowski.

               STATEMENT OF HON. LISA MURKOWSKI, 
                    U.S. SENATOR FROM ALASKA

    Senator Murkowski. Thank you, Mr. Chairman. I appreciate 
your calling this hearing. So often when we are talking about 
Contract Health costs and services, we get into the statistics, 
we get into the percentages. Your introduction this morning of 
Tracie and the story of Russell reminds us that it is not just 
statistics. These are sons and daughters and mothers and 
uncles. They are real people, and I appreciate you reminding us 
of that in a very poignant way.
    I want to welcome all of the witnesses her today, with a 
particular welcome to Sally Smith, a leader, Chair of the 
National Indian Health Board, and also a leader of the Bristol 
Bay Area Health Corporation. Your dedication in the health 
area, not only in the State but around the Country with Indian 
Health Care, is greatly appreciated. I appreciate your making 
the long haul back here and your comments here this morning.
    As you pointed out, Mr. Chairman, Contract Health Services 
Program is probably one of the most important components of the 
overall Indian health care delivery system, and yet the 
challenges that it faces are quite significant--the vacancy 
rates for key health professionals, the lack of facilities, the 
ever-increasing cost of health care, and then the narrowing 
medical priorities, and they all contribute to either 
increasing CHS demand or reducing the available services that 
are out there.
    Up in Alaska, we have the added challenge of transporting 
our Native patients to obtain the care. This is done mostly by 
airplane. We simply don't have the road systems up north, and 
so people are transported not by car, not by ambulance, but 
really by air ambulance, if you will, because we don't have any 
roads. You can't really see from the chart, but you can look to 
the numbers there. For somebody flying in from Ninilchik to 
Anchorage to receive care, it is an $1,100 airplane ticket. 
Coming out of Savoonga, it is a $1,000 airplane ticket. Coming 
from Old Harbor, which is over in Kodiak, it is over $1,300.
    I think these figures are actually several months old. In 
fact, I know that they are several months old and they haven't 
been updated since we have seen the astronomical price 
increases in the State as they related to the cost of avgas and 
how we are moving our folks around. So we know that the numbers 
are much higher.
    I understand that last year, the Bristol Bay Area Health 
Corporation received approximately $697,000 total for CHS, but 
they spent approximately $2 million in patient travel alone. So 
when you look at this imbalance--and that is not counting the 
cost of the service, that is just counting the cost of the air 
travel. And we all know it is not luxury air travel.
    Mr. Chairman, you already mentioned the denials. In looking 
at the IHS data for the tribes that are reporting, in fiscal 
year 1998 there were 15,844 denials and 84,090 deferrals. In 
fiscal year 2006, there were 33,000 denials, 158,000 deferrals. 
In fiscal year 2007, there were 35,000 denials--and I am 
rounding these up--and 161,751 deferrals. These charts indicate 
that there has been a 46 percent increase in denials from 
efforts to effectively manage the available resources.
    We should all be troubled by these declination and these 
deferral rates. But again, as I mentioned and as you have 
pointed out, this isn't just data that we are discussing. These 
are Native people. These are American Indians all around the 
Country that are suffering until they can finally access the 
services that they need.
    We appreciate that funding is a major issue for Contract 
Health Services, but I know that that isn't the only one. I do 
appreciate the hearing today as a step in examining all of the 
impediments to the program. We recognize that the challenges 
are large, but we have very committed individuals working with 
us. I am hopeful that we will make some progress in addressing 
it.
    Thanks, Mr. Chairman.
    The Chairman. Senator Murkowski, thank you very much.
    Senator Johnson?

                STATEMENT OF HON. TIM JOHNSON, 
                 U.S. SENATOR FROM SOUTH DAKOTA

    Senator Johnson. Thank you, Chairman Dorgan, for holding 
this hearing.
    For the nine treaty tribes in my State, the failures of the 
contract health system cause more pain and more tragedy than 
anything else they face. The stories are heart-wrenching. 
People have called my office because they have cancer and been 
told by the IHS that they can't receive treatment because it is 
not a priority-one threat to life and limb.
    In South Dakota, we recently lost a great leader to cancer. 
Harvey White Woman was a man who lived an honorable life and 
worked for the Lakota Sioux people. After he was diagnosed with 
a rare form of cancer, he received four rejection letters from 
the IHS telling him that his treatment was not a priority. The 
strain this must have put on a man who was already fighting for 
his life is impossible to imagine.
    Sadly, Harvey's story is not unique and others have gone 
through similar tragedies. While we have worked to increase 
funding for the Indian Health Service, there are problems far 
beyond funding. The Direct Service Tribes and tribal members in 
my State want their stories about Contract Health to be heard 
and have been sending them to my office. Mr. Chairman, I would 
like to submit these stories and have them made part of the 
Committee record.
    Thank you and I look forward to hearing from the witnesses.
    The Chairman. Senator Johnson, thank you very much.
    Senator Barrasso?

               STATEMENT OF HON. JOHN BARRASSO, 
                   U.S. SENATOR FROM WYOMING

    Senator Barrasso. Thank you very much, Mr. Chairman.
    Before beginning my opening statement, I would like to 
introduce to the Committee the Chairman of Wyoming's Northern 
Arapaho Tribe, Al Addison. Chairman Addison, would you please 
stand and be recognized? Thank you very much for being with us 
today.
    [Applause.]
    Senator Barrasso. As I mentioned during our last hearing, 
Chairman Addison and the Northern Arapaho Tribe continue to 
mourn the loss of three teenage girls who passed away a few 
weeks ago. Chairman Addison, thank you for being here with us 
today amid such terrible circumstances. You and the Northern 
Arapaho tribal members are in our thoughts and in our prayers.
    Mr. Chairman, as a physician, I have worked for over two 
decades to help the people of Wyoming stay healthy and lower 
their medical costs. This is a challenge in rural and frontier 
States. Our unique circumstances require us to work together, 
to share resources, and to develop networks. These same 
principles are critical to support and modernize the Indian 
health care delivery system. We all know the serious problems 
the Federal Government and the tribes face to deliver health 
care services in a cost-effective and efficient and in a 
culturally sensitive way.
    Wyoming's Wind River Reservation is home to approximately 
10,500 members of the Eastern Shoshone and Northern Arapaho 
Tribes. It is the third-largest reservation in the United 
States, covering more than 2.2 million acres. Tribal members in 
Wyoming have worse than average rates of infant mortality, of 
suicide, substance abuse, alcohol abuse, unintentional injury, 
lung cancer, heart disease and diabetes. When I last visited 
the Wind River Reservation, the tribal leaders told me how 
difficult it is for them to recruit and retain staff, to 
stretch each dollar to deliver essential services, to respond 
to cultural barriers, and to give families information to make 
better lifestyle choices.
    I want to commend Rick Brannon. He and the Wind River 
Service Unit staff have incredible compassion, dedication and 
do incredibly hard work. Rick and his very capable staff are 
holding the two Wind River Reservation health clinics really 
together with duct tape. Medical inflation, increasing service 
demands, limited competitive pricing structures and rural 
access issues are all putting severe financial pressures on our 
clinics in Wyoming.
    In response, their only option is to require strict 
adherence to a medical priority system. Basic care is still 
available--stitches for a cut or antibiotics for a sinus 
infection or a brace for a sprained ankle--but trauma patients 
injured in a car accident or a house fire, they will get 
immediate emergency treatment.
    Those with medical needs that fall outside the priority 
system may not. An enrolled tribal member may need to see an 
outside specialist to assess a severe skin condition or undergo 
knee surgery. But if the injury falls outside the priority 
system, then the Indian Health Service clinic will provide pain 
medication and place the patient on a waiting list.
    Due to this situation, Mr. Chairman, many of these patients 
in my State then develop narcotic addictions while waiting for 
a specialty consultation. Using this medical priority system, 
my State's Indian Health Service clinics carried a $1 million 
Contract Health Services deficit last year. On top of that, 
they denied almost $11 million in medically necessary specialty 
care.
    Recent Indian Health Service and Contract Health Service 
fiscal intermediary reports show that annual medical costs 
continue to increase, while the level of services offered 
continues to decrease. The cost per visit is increasing, while 
the purchase services are decreasing.
    We need to reduce the health care disparities among 
American Indians and Alaska Natives. We need continued and 
sustained improvements in access to treatment and prevention 
services. I want to make sure that the people on the Wind River 
Reservation and all Native people across America have equal 
access to quality, affordable medical care. That is why I 
supported the Indian Health Care Reauthorization bill that was 
passed by the Senate earlier this year. It is long past time 
for the House to act on the Senate's legislation. We must act 
now and get the bill to the President for his signature.
    It is equally as important that the care we provide is 
cost-effective and produces results. The Indian Health Service 
is not like other Federal health care programs. Congress has 
only limited access to the research data that is needed to 
modernize and improve Indian health care. I know this Committee 
will continue to focus our efforts to improve health care 
services. To do so, Mr. Chairman, we need good data and 
research to evaluate the current delivery system. We need to 
expose barriers that prevent collaboration and networking, that 
prevent innovation and sharing of resources.
    Today, neither the government nor private advocacy groups 
can explain exactly how all the funds are used to coordinate 
medical services. If we do not know where the resources are 
being spent, the number of programs dedicated to provide 
services, how these programs coordinate the services, or the 
outcomes achieved, then how can we be certain we are maximizing 
our ability to help the people?
    I offered an amendment to the Indian Health Care 
Improvement Act that will provide us this critical information. 
Once evaluated, we will know how best to target Federal funds 
to programs making the greatest impact. Then we can focus on 
additional areas where Native Americans and Alaska Natives need 
our support.
    Thank you, Mr. Chairman, for holding this hearing.
    The Chairman. Senator Barrasso, thank you very much.
    I would note, given Senator Barrasso's statement, that this 
Committee has two doctors serving on the Committee and that is 
very helpful to us as we deal with Indian health care issues. 
So we welcome you again. I know Senator Barrasso has 
contributed a great deal since joining our Committee.
    Let me ask again, if I might, of the witnesses that you 
adhere to the five-minute rule. We do have a light up here. 
When the light turns red, you probably know what that means. We 
have asked if Mr. McSwain, the Director of the Indian Health 
Service would be willing, and he is willing, to testify 
following our first panel. I very much appreciate his 
willingness to do that. It means extra time out of his day, but 
I think it will be very helpful for him to hear the witnesses 
and then allow us and Mr. McSwain to respond to it.
    This Committee, with my support and the support of the Vice 
Chair and others, unanimously supported Mr. McSwain and his 
nomination as Director of the Indian Health Service. We want 
him to succeed. We appreciate his willingness to testify today, 
but I have specifically asked if he would wait until the first 
panel so that he could listen to you.
    Thanks to the panel for being here. Many of you have come 
long distances. You are going to provide some important 
information to us. We will begin with Sally Quinn, speaking of 
leadership. Sally Quinn is Chair of the National Indian Health 
Board. Excuse me, Sally Smith, not Quinn. I apologize. I know 
Sally Smith. Yes, a nickname.
    [Laughter.]
    The Chairman. Now, they will call you Quinn.
    Ms. Smith. Yes, they will. Thank you, Senator.
    [Laughter.]
    The Chairman. I know Sally Smith. I am sorry about that. 
She is Chair of the National Indian Health Board. She will 
provide the national perspective on Contract Health Services. 
Let me also say she played an integral role in helping us pass 
the Indian Health Care Improvement Act. Ms. Smith's work is 
very important.
    You may proceed.

 STATEMENT OF SALLY SMITH, CHAIR, NATIONAL INDIAN HEALTH BOARD

    Ms. Smith. Thank you so very much.
    The National Indian Health Board is honored to be able to 
present today on behalf of the 562 federally recognized tribes. 
On a note, though, let me say that I am disappointed that we do 
not have the perspective of the Direct Service Tribes here 
today as I look at the list. The Direct Service Tribes and the 
Land-based Tribes are not testifying today. I believe it is 
very important that the Committee hear their views with regard 
to Contract Health Services so that you can hear the views from 
throughout Indian Country.
    Dr. Greg Vanderwagen, former Chief Medical Officer of the 
Indian Health Service, spoke on rationing health care, and I 
quote, ``We hold them off until they are sick enough to meet 
our criteria. That is not a good way to practice medicine. It 
is not the way providers like to practice. If I were an Indian 
tribal leader, I would be frustrated.''
    The Contract Health Service programs should support all 
costs so any Indian person can access the treatment that will 
support the best patient outcomes, instead of the most cost-
effective or cost-avoidance method to stretch CHS dollars. The 
CHS program should pay for preventive care and medical 
interventions, instead of authorizing payment for only 
emergency cases.
    The CHS program need to move into the 21st century by 
providing adequate funding to address the level of need in 
Indian Country. Congress and the Administration should live up 
to the promises made in treaties, made in good faith, by the 
ancestors of people who are asking today for the ability to 
control the destiny of the quality of life for our people.
    Senators Dorgan and Murkowski, excuse me, before I 
continue, please allow me to express the gratitude of the 
tribes for the work the Committee has done to advance the 
reauthorization of the Indian Health Care Improvement Act, S. 
1200. We are especially thankful for the leadership of Senators 
Dorgan and Murkowski and other members of the Committee for 
their tenacity in ensuring successful passage of S. 1200 by an 
overwhelming bipartisan vote of 83 to 10.
    Tribes are also especially grateful to you, Chairman 
Dorgan, for introducing the amendment to the Senate budget 
resolution to increase the IHS appropriation by $1 billion. And 
Vice Chair Murkowski, we are appreciative, and I am personally 
appreciative, for your support also of the $1 billion 
amendment, as well as other members of the Committee who voted 
for its passage.
    I know that due to limited CHS funding, the IHS and tribal 
programs are, in most cases, only able to authorize CHS funding 
under a medical priorities system that gives most of the 
funding to the priority level one emergent or acutely urgent 
care services. These services are necessary to prevent the 
immediate death or serious impairment of the health of the 
individual that if left untreated would result in uncertain, 
but potentially grave outcomes.
    Native beneficiaries who do not have access to alternate 
health care resources such as private insurance, Medicare or 
Medicaid health care services under the CHS program, are 
limited to emergency or urgent care services, most of which are 
not guaranteed.
    If the CHS program paid for other medical priorities like 
preventive care services such as cancer screenings, specialty 
consultations, and diagnostic evaluations, early detection and 
treatment of diseases or illnesses could result in substantial 
savings to the CHS program, but more importantly lives would be 
saved and the quality of life would improve. Without cancer 
screenings and diagnostic evaluations, life-threatening 
illnesses go untreated and the patient dies or lives a short 
painful life.
    That is not to say that the CHS program doesn't save lives, 
however. The IHS estimates, and we heard earlier, that there 
are $238 million in unmet CHS needs. In our opinion, this is a 
very low estimate. Further complicating this estimate is the 
fact that one of the unintended consequences of patients 
experiencing perpetual denials of needed health care services 
is that they finally stop seeking needed care. Therefore, it is 
difficult to determine an accurate aggregate CHS financial need 
because Native parents learn from experience that is it futile 
to request services they know will be denied or deferred.
    This estimate also does not capture deferred or denied 
services from the majority of tribally operated CHS programs, 
which is nearly one-half of all tribes. More importantly, the 
estimated amount of unmet CHS needs does not capture all of the 
requests for CHS services that were denied that could be dubbed 
bureaucratic reasons, for instance noncompliance with the CHS 
regulatory requirements, emergency notification not within 72 
hours, non-emergency and no prior approval, and that the 
resident lives outside a CHSDA, and the story goes on. I could 
go on with a half-dozen stories, if time permits.
    There is grave concern in Indian Country that there is a 
trend of increasing denial of CHS claims which is compounded by 
the continued under-funding of the CHS program. Because CHS 
programs are so consistently shamefully under-funded, we know 
that there are consequences. Very quickly, let me say it 
results in poor credit ratings, self-imposed impoverishment, 
helplessness and depression, and the list goes on. You have 
those in your handout there.
    Again, I come armed with stories. If questioned, I would be 
happy to relate the stories from here in Alaska. There is one 
thing, though. I know the Committee has received many letters--
Senator Dorgan, you have shown those to us--from tribes across 
the Country. There are so many stories to tell. My hope is that 
this is not the only hearing that will be held on CHS. I 
strongly encourage to hold field hearings in all areas of 
Indian Country.
    The Direct Service Tribes' national conference will be held 
August 5-7 in Spokane. As the Chair of the National Indian 
Health Board, I invite you to hold a field hearing at our NIHB 
annual consumer conference to be held in Temecula, California 
September 22-25.
    Thank you so very much for the opportunity to provide 
testimony. I would be happy to answer any questions.
    [The prepared statement of Ms. Smith follows:]

 Prepared Statement of Sally Smith, Chair, National Indian Health Board
Introduction
    Chairman Dorgan, and Vice-Chairman Murkowski and distinguished 
members of the Senate Indian Affairs Committee, I am H. Sally Smith, 
Y'upik Eskimo and Chairman of the National Indian Health Board (NIHB). 
\1\ On behalf of the NIHB, it is an honor and pleasure to offer the 
NIHB's testimony on access to contract health services in Indian 
Country. During our discussion we will focus on how inadequate contract 
health services (CHS) funding has created a health care crisis in 
Indian Country and if not corrected, will continue to undermine the 
Federal Government's trust responsibility to provide health care to 
American Indians and Alaska Natives (AI/ANs). Today, we will describe 
how the lack of CHS funding has created and perpetuated a system of 
denials and deferrals that results in rationing of health care. As Dr. 
Craig Vanderwagen, M.D., a former chief medical officer for Indian 
Health Service (IHS), acknowledged in talking about the CHS program:
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    \1\ Established in 1972, NIHB serves Federally Recognized AI/AN 
tribal governments by advocating for the improvement of health care 
delivery to AI/ANs, as well as upholding the Federal Government's trust 
responsibility to AI/ANs. We strive to advance the level and quality of 
health care and the adequacy of funding for health services that are 
operated by the IHS, programs operated directly by Tribal Governments, 
and other programs. Our Board Members represent each of the twelve 
Areas of IHS and are elected at-large by the respective Tribal 
Governmental Officials within their Area. NIHB is the only national 
organization solely devoted to the improvement of Indian health care on 
behalf of the Tribes.

        ``We hold them off until they're sick enough to meet our 
        criteria. That's not a good way to practice medicine. It's not 
        the way providers like to practice. And if I were an Indian 
        tribal leader, I'd be frustrated.'' \2\
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    \2\ Interview with Dr. Vanderwagen as documented in the Report 
published by the U.S. Commission on Civil Rights, Broken Promises: 
Evaluating the Native American Health Care System, September 2004.

    Before I continue, please allow me to express the gratitude of the 
Tribes for the work the Committee has done to advance the 
reauthorization of the Indian Health Care Improvement Act (IHCIA), S. 
1200. We are especially thankful for the leadership of Senators Dorgan 
and Murkowski, and other members of the Committee, for their tenacity 
in ensuring successful passage of S. 1200 by an overwhelming bi-
partisan vote of 83-10. Now that the Senate bill passed, Indian Country 
is working hard to ensure passage of the House companion bill, H.R. 
1328. We look for continued support from you and ask you to reach out 
to House Leadership on both sides of the Aisle to help us make 
reauthorization of the IHCIA a reality in this Congressional Session.
    Tribes are also especially grateful to you, Chairman Dorgan, for 
introducing your amendment to the Senate Budget Resolution to increase 
the Indian Health Service (IHS) appropriations by $1 billion. Vice-
Chairman Murkowski, we are appreciative for your support of the $1 
billion amendment; as well as, others members of the Committee who 
voted for its passage. At that time, I was serving as Chair of the 
Department of Health and Human Services (HHS) Tribal Budget 
Consultation meeting, and when I announced that the amendment passed, 
the audience erupted into a huge round of applause. As this committee 
well knows, the increase in IHS funding is vitally needed to address 
the funding shortfall for CHS, and other health care needs such as, 
increased funding for health care facility construction and contract 
support costs.
Snapshot of the Health Status of American Indians and Alaska Natives
    AI/ANS have a lower life expectancy and higher disease burden than 
all other Americans. Approximately 13 percent of AI/AN deaths occur 
among those under the age of 25; a rate three times that of the total 
U.S. population. Our youth are more than twice as likely to commit 
suicide, and nearly 70 percent of all suicidal act in Indian Country 
involve alcohol. We are 670 percent more likely to die from alcoholism, 
650 percent more likely to die from tuberculosis and 204 percent more 
likely suffer accidental death. Disproportionate poverty, poor 
education, cultural differences, and the absence of adequate health 
service delivery are why these disparities continue to exist.
Background: Contract Health Services
    The IHS is the Federal agency with the primary responsible for the 
delivery of health care to AI/ANs. The provision of health care to AI/
ANs are provided through two types of services:

        1.) direct care services that are provided in IHS or tribally 
        operated hospitals and clinics; and

        2.) contract health services (CHS) that are provided by private 
        or public sector facilities or providers based on referrals 
        from the IHS or tribal CHS program.

    The IHS established the CHS program under the general authority of 
the Snyder Act, which authorizes appropriations for the ``relief of 
distress and conservation of health of Indians.'' The IHS first 
published regulations in 1978. \3\ These regulations were revised in 
1990 to clarify the IHS Payor of Last Resort Rule and today, continue 
as the effective regulations for the operation of the IHS CHS program 
and are found at 42 CFR Part 136. Pursuant to the Indian Self-
Determination and Education Assistance Act (ISDEAA), tribes and tribal 
organizations may elect to contract or compact for the operation of the 
CHS program consistent with the CHS eligibility regulations. 
Approximately 52 percent of the CHS programs are operated by tribes and 
tribal organizations.
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    \3\ In 1987, the IHS published final regulations revising the 
eligibility criteria for direct and contract health services to members 
of Federally-recognized Tribes residing in Health Service Delivery 
Areas. These regulations were intended to make the eligibility criteria 
for direct and contract health services the same. However, these 
regulations remain subject to a Congressional moratorium prohibiting 
implementation until such time as the IHS conducts a study and submits 
a report to Congress on the impact of the 1987 final rule.
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    While the majority of services to AI/ANs are provided in IHS or 
tribally operated hospitals and clinics, the IHS and tribal programs 
authorize services by private or public sector facilities or providers 
pursuant to the CHS regulations when:

   a direct care facility is not available,

   the direct care facility is not capable of providing the 
        required emergent or specialty care, or

   the direct care facility is not capable of providing the 
        care due to medical care workload.

    The IHS is a payor of last resort and CHS funds are authorized 
subject to the availability of alternate resources, such as Medicare, 
Medicaid, or private health insurance.
    The basic eligibility criteria for both direct care and contract 
health services requires that the person being served is of ``Indian 
descent belonging to the Indian community served by the local 
facilities and program.'' For eligibility for direct care services, 
residency is not required in the particular Indian community where 
services are being sought as long as the person is a member or 
descendent of a Federally-recognized tribe. However, eligibility for 
CHS requires residency in a Contract Health Service Delivery Area 
(CHSDA), a geographic area defined by regulation or in statute, but in 
general, includes the reservation and the counties contiguous to that 
reservation.
    CHS regulations require that request for services must be pre-
approved by the local CHS review committee, consisting of clinical and 
administrative staff, and determined to be medically indicated and 
within medical priorities. If emergency services are provided by a non-
IHS provider, notification must be made to the local IHS or tribal CHS 
service unit within 72 hours, or 30 days for emergency care provided to 
the elderly or disabled.
    It is worthy of note that the often-quoted ``Don't get sick after 
June 1st'' statement stems from the time of year that CHS funding is 
depleted annually. The NIHB Board has embraced the creation of a 
foundation called ``The June First Fund,'' which would offer Indian 
people a place to go for funding to access emergency and chronic health 
care financing that would otherwise be depleted by June 1st. This 
program is in its infancy and organizational structures are currently 
under consideration. While NIHB wholly supports sovereignty and 
recognizes the obligation of the federal government to provide adequate 
health care services to Indian people, it also recognizes that many 
Indian people die each year, have amputations that could be avoided and 
suffer needlessly--all because the federal obligation to provide health 
care services is not met.
Medical Priorities
    Due to limited CHS funding, IHS and tribal programs are in most 
cases only able to authorize CHS funding under a medical priority 
system that gives most of the funding to the Priority Level 1: Emergent 
or Acutely Urgent Care Services. A review of the CHS medical priorities 
provides a picture of services authorized under the CHS program based 
on current funding levels versus what should or could be covered if the 
CHS program were fully funded. One of the major frustrations for tribal 
programs is the continual need to educate non-IHS providers that the 
CHS program is not an insurance plan and because of limited CHS funding 
not all medical claims for services can or will be paid. The priority 
system is outlined as follows:
    Priority Level 1: Emergent or Acutely Urgent Care Services are 
defined as services that are necessary to prevent the immediate death 
or serious impairment of the health of the individual and that if left 
untreated, would result in uncertain but potentially grave outcomes. 
Examples of Priority Level 1 services are as follows:

   Emergency room care for emergent/urgent medical conditions, 
        surgical conditions, or acute trauma

   Emergency inpatient care for emergent/urgent medical 
        conditions, surgical conditions, or acute injury

   Renal dialysis, acute and chronic

   Emergency psychiatric care involving suicidal persons or 
        those who are a serious threat to themselves or others

   Services and procedures necessary for the evaluation of 
        potentially life threatening illnesses or conditions

   Obstetrical deliveries, acute perinatal care and neonatal 
        care

    Priority II: Preventive Care Services are defined as primary health 
care aimed at the prevention of disease or disability. For those IHS 
and tribal programs that are not able to provide screening and 
preventive services in direct care IHS or tribal facilities, 
authorization of preventive care services places additional burdens on 
the CHS program funding. Examples of the preventive care services 
include:

   routine prenatal care

   cancer screenings such as mammograms and screenings for 
        other diseases

   non-urgent preventive ambulatory care

   public health intervention.

    Priority III: Primary Secondary Care Services involve treatment for 
conditions that may be delayed without progressive loss of function or 
risk of life, limb or senses. Examples include:

   specialty consultations in surgery, obstetrics, gynecology, 
        pediatrics, etc

   diagnostic evaluations and scheduled ambulatory visits for 
        non-acute conditions.

    Priority IV: Chronic Tertiary and Extended Care Services include 
such services as rehabilitation care, skilled nursing home care, highly 
specialized medical procedures restorative orthopedic and plastic 
surgery, elective open cardiac surgery, and organ transplantation.

    Priority V: Excluded Services such as cosmetic procedures and 
experimental services.

    For AI/ANs beneficiaries, who do not have access to alternate 
health care resources such as private insurance, Medicare or Medicaid, 
health care services under the CHS program is limited to emergency or 
urgent care services, most of which is not guaranteed. For those of you 
on the Committee, would you tolerate health insurance coverage for you 
and your family limited to only emergency or urgent care? We think not: 
and it is not tolerable for those AI/AN beneficiaries dependent on the 
CHS for their health care needs not otherwise available in IHS or 
tribal facilities.
    If the CHS program paid for other medical priorities like 
preventive care services, such as, cancer screenings, specialty 
consultations, and diagnostic evaluations, early detection and 
treatment of diseases or illnesses would result in substantial savings 
to the CHS program. But more importantly, lives would be saved and 
quality of life would improve. Without cancer screenings and diagnostic 
evaluations, life threatening illnesses go untreated and the patient 
dies or lives a short, painful life.
The Reality:
    The IHS Budget Justification of Estimates for Appropriations 
Committees FY 2009, includes the following charts indicate that the 
annual medical costs continue to increase while the level of services 
provided annually is decreasing. This correlates with increases in the 
number of deferred and denied CHS services:



    The funding levels for the IHS CHS program have increased since 
1990 but have not kept up with increases in health care costs:



Some Promises Met
    The CHS program does save lives. In FY 2006, the IHS fiscal 
intermediary (FI), \4\ Blue Cross/Blue Shield of New Mexico, processed 
298,000 purchase orders and, after coordination of third party 
benefits, made payments of approximately $230 million. The payments 
were made for a variety of diagnosis such as: $45 million for injuries 
resulting from such incidents as motor vehicle accidents and gun shot 
wounds, $31 million for heart disease, $18 million for cancer 
treatment, $16 million for end stage renal dialysis, $6 million for 
mental disorders and substance abuse, and $4 million for pregnancy 
complications and premature births. These payments were made on behalf 
of AI/ANs who met the CHS eligibility criteria and medical priorities, 
in most instances, Priority Level 1: emergent or acute urgent care.
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    \4\ The IHS contracts with the FI to process CHS claims and make 
payments consistent with IHS CHS eligibility regulations and CHS 
payment policies. Nearly all of the tribes and tribal organizations 
that operate 52% of the IHS CHS programs do not use the FI for claims 
processing. Thus, the reports produced by the FI are based on claims 
from IHS operated CHS programs and only seven of the tribal CHS 
programs.
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Underfunding and Its Unintended Consequences
    Due to the severe underfunding of the CHS program, the IHS and 
tribal programs must ration health care. Unless the individual's 
medical care is Priority Level 1 request for services that otherwise 
meet medical priorities are ``deferred'' until funding is available. 
Unfortunately, funding does not always become available and the 
services are never received. For example, in FY 2007, the IHS reported 
161,750 cases of deferred services. In that same year, the IHS denied 
35,155 requests for services that were not deemed to be within medical 
priorities. In addition, in 2007, IHS was not able to fund 895 
Catastrophic Health Emergency Fund (CHEF) \5\ cases. Using an average 
outpatient service rate of $1,107, the IHS estimates that the total 
amount needed to fund deferred services, denied services not within 
medical priorities, and CHEF cases, is $238,032,283, as detailed below:
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    \5\ The CHEF is administered by IHS Headquarters and pays for high 
cost CHS claims.

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        $20,058,448--CHEF

        $179,057,250--Deferred

        $38,916,585--Denied

    This estimate of $238 million for annual unmet CHS needs is 
arguably a very low estimate. Further complicating this estimate is the 
fact that one of the unintended consequences of patients experiencing 
perpetual denials of needed health care services is that they will stop 
seeking care. Therefore, it is difficult to determine an accurate, 
aggregate CHS financial need because AI/AN patients learn from 
experience that it is futile to request services that they know will be 
denied or deferred. This estimate also does not capture deferred or 
denied services from the majority of tribally operated CHS programs 
(nearly one-half of all tribes). But more importantly, the estimated 
amount of unmet CHS needs does not capture all of the other requests 
for CHS services that were denied for what could be dubbed 
``bureaucratic reasons''; i.e., non-compliance with the CHS regulatory 
requirements, as indicated by the CHS FY 2007 Denial Report:



    The FY 2007 CHS denial report indicates that over 16,000 CHS claims 
were denied because an IHS facility was available and accessible. While 
we don't know all the details of why these claims were denied, of the 
over 600 health care facilities operated by the IHS or tribes, only 46 
hospitals have emergency room care. The health care provider vacancy 
rates at IHS facilities are 17% for physicians, 18% for nurses, and 31% 
for dentists. In addition, many of the IHS facilities are over 30 years 
old and do not have the necessary equipment and staff to provide many 
of the health services needed. When direct care services cannot be 
provided in an IHS or tribal facility, extra demand is placed on the 
CHS program funding and the facility loses revenue from third party 
payors. Many of the IHS and tribal facilities are located in very 
remote locations where transportation between a patient's home and the 
nearest IHS facility can be limited or non-existent.
    Members of the Navajo Nation living in the community of Ganado, 
Arizona used to regularly receive denial of CHS claims until the IHS 
Navajo Area reached an agreement with the Sage Memorial Hospital, a 
non-IHS provider at the time, to provide services to 18,000 Navajo 
tribal members residing in the Ganado catchment area. Because the 
closest IHS hospital was approximately 40 miles away from Ganado, 
Navajo tribal members would seek treatment at Sage Memorial Hospital 
located in Ganado. The IHS Navajo Area would deny payment of these 
services because an IHS facility was available and accessible albeit 40 
miles down the road. The IHS Navajo Area, using CHS funds, negotiated a 
contract with Sage Memorial Hospital to provide care to Navajo tribal 
members in the Ganado catchment. Tribal members no longer have to 
travel long distances for their health care and the local hospital 
receives payment for the care provided. This model might not work in 
all tribal communities but represents a 21st century approach to 
address the health care needs of the tribal members.
    The FY 2007 CHS denial report indicates that approximately 21,000 
claims were denied because the care provided was non-emergency and 
there was no prior approval. Again, we do not know the underlying facts 
for why these claims were denied. However, prior approval is required 
for non-emergency cases and that determination is made by a CHS review 
committee consisting of both clinical and administrative staff of the 
facility. But many of the claims could have been denied because the 
services were provided after-hours, (e.g., after 5 pm or over the 
weekend), when many IHS or tribal ambulatory centers are closed. For 
example, an Indian child could break his or her ankle playing softball 
on a Saturday. Under a prudent layperson's standard, \6\ this would be 
considered an emergency. But the NIHB has heard from tribal communities 
that CHS claims are denied because a ``broken ankle'' is not considered 
an emergency. Where else in America would a parent hesitate to take 
their injured child to an emergency room for fear that the services 
would not be covered by their insurance? Many tribal clinics, such as 
the Oneida Tribe of Wisconsin, contract with local hospitals to provide 
services to its members during non-operational hours.
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    \6\ An emergency medical condition is defined as a medical 
condition manifesting itself by acute symptoms of sufficient severity 
(including severe pain) such that a prudent layperson, who possess an 
average knowledge of health and medicine, could reasonably expect the 
absence of immediate medical attention to result in placing the health 
of the individual (or, with respect to a pregnant woman, the health of 
the woman or her unborn child) in serious jeopardy, serious impairment 
to bodily functions, or serious dysfunction of any bodily organ or 
part.
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    The FY 2007 CHS denial report shows that 66,000 CHS claims were 
denied because an alternate resource was available. Some Tribal Leaders 
object to the IHS Payor of Last Resort Rule because AI/ANs should not 
have to apply for other alternate resources, such as Medicaid, as a 
condition of receiving health services from the IHS--health care is a 
responsibility of the U.S. government. Unfortunately, the IHS is a 
discretionary program, with limited CHS dollars, and until it becomes 
an entitlement program, is dependent on the availability of other 
government programs, Medicare, Medicaid or the Veteran's Administration 
to supplement the CHS program.
    Tribal CHS programs have expressed frustration with having to 
require its tribal members to apply for alternate resources. Due to 
income fluctuations, such as seasonal employment in the Alaska fishing 
industry, many tribal members are dis-enrolled from alternate resource 
programs, such as Medicaid, and then have to reapply. This can be 
burdensome, especially for the elderly. Tribal members have expressed 
concerns that CHS claims are denied or payment is delayed due to 
coordination of third party benefits. Tribal members receive collection 
notices from providers for unpaid medical bills and this ruins their 
credit history.
    There is grave concern in Indian Country that there is a trend of 
increasing denial of CHS claims which is compounded by the continued 
underfunding of the CHS program. The result: a failure of the Federal 
government to fulfill its trust responsibility to Indian people. A 
major influx of CHS funding is desperately needed to bring the CHS 
program into the 21st century; however, not all of the ``problems'' in 
accessing CHS is due to a lack of funding. The CHS eligibility 
regulations were promulgated thirty years ago; clearly, the delivery of 
health care in mainstream America has changed. The CHS regulations 
contain requirements such as prior approval, 72 hour emergency 
notification, and other regulatory requirements unique to the Indian 
health system. The regulations are complicated to understand both by 
the AI/AN patients and non-IHS providers. The CHS regulations were 
intended to limit the IHS's liability for CHS services, but, because 
the CHS program is so consistently, shamefully underfunded, CHS 
decisions are driven by the need to save costs to the detriment of AI/
ANs ability to receive standard health care, which is preventing AI/ANs 
from living healthy lives. Other unintended consequences, include:

        1. Poor credit ratings because of unpaid medical bills due to 
        CHS denial

        2. Self-imposed impoverishment in order to qualify for Medicaid

        3. Unnecessary prolonging of pain leading to addictions, such 
        as: painkillers

        4. Helplessness and Depression

        5. Untreated conditions can lead to chronic illness that leads 
        to disability

        6. Providers refuse to see AI/AN patients for fear of not being 
        reimbursed for services

        7. Community economic loss due to prolonged injury or illness 
        that prevents one from working

    Chairman Dorgan, I know your Committee has received many letters 
from Tribes identifying CHS issues in their particular community. For 
the record, I have included as part of my testimony, two letters 
submitted by our Board members representing the Bemidji and Billings 
Area that tell their personal stories and reflect many of the same 
concerns expressed in this testimony.
The Alaska Perspective
    In addition to being the Chair of the National Indian Health Board, 
I am also the chair of the Board of Directors of the Bristol Bay Area 
Health Corporation (BBAHC), a co-signer of the Alaska Tribal Health 
Compact which provides health care to Alaska Natives in the 45,000 
square mile Bristol Bay service area and operates the only inpatient 
hospital in the region near Dillingham, Alaska. From my service with 
BBAHC, I am well aware of the severe impact which the shortage of 
contract health service funding has on both the IHS and tribally-
operated health programs in rural areas, especially rural Alaska.
    In Alaska they tell a story about a federal official who telephoned 
to an Alaska Native health care program and asked why, when you send 
patients to the Alaska Native Medical Center (ANMC) in Anchorage, you 
always send them by air. Why don't you send them by car? The official 
did not understand that in many parts of Alaska there are no roads. We 
do not have roads between the Kanakanak Hospital near Dillingham and 
many of the villages where we operate out-patient clinics or regional 
clinics. There is no road between Dillingham and Anchorage where the 
IHS-funded Alaska Native Medical Center (ANMC), the tertiary care 
facility serving Alaska Natives throughout Alaska, is located. We are 
separated from Anchorage by a range of snow-capped mountains, and air 
travel is the only way we can send patients there or to any other 
hospital facility.
    Although much of our tertiary care is provided by the IHS-funded 
ANMC, what is often overlooked is that our budget must cover the cost 
of patient transportation to Dillingham from the villages and to 
Anchorage from Dillingham. In fact, the entire contract health care 
budget which we presently receive is consumed by transportation costs. 
In FY 2007, BBAHC spent $425,000 in regular seat or charter fair for 
non-emergency cases plus an additional $1,200,000 in Air Medivac costs. 
This cost was up $250,000 from the previous year and, given the rising 
costs of air travel, it can be expected to continue to climb. There has 
been no adjustment in our contract health funding to enable us to meet 
these increases. BBAHC has been covering the differences between the 
CHS funding received verses costs expended. For instance, in FY 2007, 
the BBAHC received $564,000 in CHS funding plus the $111,000 for 
Medivac funding and expended the $425,000 in regular seat or charter 
fare for non-emergency travel and $1,200,000 in Air Medivac costs for a 
difference of $951,000.
    There are, of course, many factors affecting our budget that makes 
the high cost of patient travel even more serious than it seems in 
isolation. For example, there is no adequate provision for maintaining 
our out-patient clinics. These are provided to our program through a 
system called ``village built clinics.'' Our member villages are relied 
upon to obtain funding for the construction of out-patient clinics. The 
clinics are then leased by the villages to the IHS which makes them 
available to BBAHC to operate through the Alaska Tribal Health Compact. 
The villages remain responsible for maintenance and, in theory, they 
are provided with the funding for maintenance through the rental 
payments from IHS. This system applies to 169 village-based out-patient 
clinics in rural Alaska.
    While this system enabled us to replace a number of drastically 
deteriorated clinic facilities and to provide clinics in some remote 
villages where there were none, it has not adjusted to the rising costs 
which affect maintenance and repair as well as air transportation. The 
total amount provided by IHS in rental payments to the BBAHC villages 
in FY 2008 was $3.7 million, the same level it has been at for l9 
years. A recent analysis shows that this level of funding covers only 
55 percent of the actual cost of maintaining these facilities. In 
addition, IHS provided these payments unusually late this year and at 
least one of our clinics was threatened with closure due to the absence 
of maintenance funding. We understand that this problem is not directly 
related to contract health care, but the increased costs cut across-
the-board. To the extent that BBAHC must divert funding from providing 
health care to patient transportation or to keeping clinics 
operational, the quality of our direct patient care is impacted. We 
have made a priority request to the Appropriation Committees to 
increase the Village Built Clinic lease program funding by $3,000,000 
in FY 2009 (with an additional increase of $2,000,000 by the end of 
five years).
    On top of this, we should note that for many years the IHS has not 
funded, in accordance with federal law, the administrative costs of our 
program as required by section 106 (a)(2) of the Indian Self-
Determination Act. This provision was intended to assure that tribes 
are able to have at least the same level of resources that the IHS does 
in providing health care by assuring that activities which tribe must 
perform (which IHS does not) or which are paid for by sources other 
than the IHS budget are fully funded in self-determination and self-
governance agreements. Again, this is not an issue that might seem 
related to contract health care, but it is. In a variety of different 
ways the federal government is not providing BBAHC, as well as many 
other tribal and Alaska Native health programs throughout the United 
States, with financial support reasonably related to the purposes 
sought to be achieved and, in some case, required by law.
Recommendations:
    Before I conclude my testimony, I do not want to leave the 
impression that the CHS program is beyond repair--it provides access to 
vital services that the IHS and tribally operated programs cannot 
provide in their facilities. But I would like to take this opportunity 
to provide the Committee with the Board's recommendations for improving 
the CHS program. I offer the assistance of the NIHB staff in 
implementing these recommendations and providing the Committee with any 
additional information or analysis.

   Hold field hearings in all areas of Indian Country.

   Require the GAO to conduct a study on CHS:

          -- Billing and reimbursement rates paid by CHS programs and 
        comparison of reimbursement rates paid by other providers of 
        health services

          -- Accessing health care after-hours

          -- Number of unpaid medical bills of AI/AN

          -- Study to measure the correlation between medication 
        addiction and the rate of denied CHS services.

          -- Credit scores and impoverishment resulting from CHS 
        denials

   Work through the Medicare Graduate Medical Education Program 
        to achieve lower health professional vacancy rates and improve 
        infrastructure at direct care sites

   Create charity partnerships

   In consultation with Tribes, update the CHS regulations

   Congressionally mandated CHS Advisory Committee, of which 
        51% would be Tribal leaders. Other suggested members should be 
        the IHS Director, the Chair of MedPAC, provider groups, and 
        academics proficient in health system structural reform.

    I appreciate the opportunity to present testimony on behalf of the 
NIHB on CHS issues in Indian Country. We appreciate your leadership in 
bringing these issues forward for discussion. There is much work to be 
done and as always, Tribal leaders support your endeavors to improve 
the CHS program and the health of Indian Country.
Attachments




    The Chairman. Ms. Smith, thank you very much for your 
testimony. We appreciate that.
    Next, we will hear from Marlene Krein. Marlene Krein is the 
President and CEO of Mercy Hospital in Devils Lake, North 
Dakota, a wonderful institution that I have visited many times. 
She will share insights from a private provider that is often 
forced to cover the costs of care provided to American Indians 
when the Contract Health Service program denies their claims.
    Ms. Krein, thank you very much for being with us. You may 
proceed.

   STATEMENT OF MARLENE KREIN, PRESIDENT/CEO, MERCY HOSPITAL

    Ms. Krein. Thank you, Senator Dorgan. I appreciate the 
opportunity to speak before this Committee and tell you some of 
our stories of how we serve the Native Americans.
    We are a faith-based hospital and our values speak for 
human life and community service. We are located near Spirit 
Lake Nation, which has approximately 7,000 members. We have 
served the lake region community for 106 years. This also 
includes the Spirit Lake Nation. I do want you to know that I 
have not been there 106 years, but just 35.
    [Laughter.]
    Ms. Krein. It is well known that the Indian Health Contract 
Service has not been funded adequately. Fort Totten has an IHS 
clinic with limited services. They are open Monday through 
Friday, 8 a.m. to 4:30 p.m. During after hours, holidays and 
other days when they are closed, the people of Spirit Lake 
Nation come to Mercy Hospital for much of their primary care. 
IHS only pays for priority one and the rest is left unpaid. 
Currently, we write off approximately $200,000 a quarter for 
IHS service in our emergency department.
    As a small rural provider, we are disproportionately 
impacted by the lack of payment for provision of services that 
are clearly a Federal obligation. In January of 2008, we 
assumed responsibility of staffing the emergency department 24/
7 when the physicians from the local clinic said they would no 
longer cover the ED during their office hours. This has 
increased our costs considerably and now it is up to about $1 
million for staffing in the emergency room.
    In August of 2000, I had the privilege of testifying before 
this Committee at a field hearing in North Dakota. What has 
changed is the number of Native Americans we serve in the 
emergency department and it has resulted in larger unpaid 
bills. I have been an employee of Mercy Hospital for 35 years, 
and the CEO since 1984. In the beginning of my tenure when the 
bills were not paid, I turned to Senator Burdick to ask for 
help. As the years went by and the unpaid dollars increased, I 
then turned to Senator Dorgan and Senator Conrad. I very much 
appreciate all that these Senators have done and do.
    I do understand that IHS does not pay for anything except 
priority one in the ED, but that leaves me in a difficult 
position with the limited hours of the clinic being open. When 
there is a need, the people of Spirit Lake Nation have nowhere 
to go except to the Mercy Hospital Emergency Department. We 
serve them because we are called to from our heritage and 
government regulations.
    A few years ago, I decided I needed to be part of the 
solution, not a part of the problem, and began meetings. I have 
met with people at the IHS Spirit Lake Health Center, Spirit 
Lake Tribal Council, the IHS Aberdeen Area Office, and over the 
years I have had numerous meetings in Washington, D.C. as well. 
At one time, the IHS clinic was looking into staying open 
longer hours. Their budget was several million dollars because 
they would need to hire an entire new staff of physicians, 
nurses, lab and X-ray technologists, et cetera.
    The issues remain, and every time there is a suggestion, 
and there have been very many, there is a roadblock by IHS, the 
tribe or the government. I have nowhere else to go except to 
you for help. It is my responsibility to ensure that Mercy 
Hospital remains open to serve the people of the lake region, 
which certainly includes members of the Spirit Lake Nation. We 
have a close relationship with many of the tribal members as 
they were born at our hospital, and through the years they have 
put their trust in us. We appreciate this and consider it an 
honor.
    We also know a solution must be found so that we can 
continue to serve. I believe we can all agree there is a 
problem with expected care and payment. It may be my 
pragmatism, but I believe we, you and I, the government and 
Mercy Hospital have a shared responsibility to see that the 
people of the Spirit Lake Nation have access to health care 24/
7 and that Mercy Hospital is compensated.
    After considerable thought and several avenues that I have 
tried through the years, I believe it is necessary for IHS to 
contract with Mercy Hospital for $500,000 per year for all 
after-hours care. The needs of Spirit Lake Nation and Mercy 
Hospital will be met, and Mercy Hospital would still be 
providing their share of charity care.
    Thank you for hearing my story, and for any assistance you 
can provide.
    [The prepared statement of Ms. Krein follows:]

   Prepared Statement of Marlene Krein, President/CEO, Mercy Hospital
History of Mercy Hospital of Devils Lake, North Dakota
    The Sisters of Mercy arrived in Devils Lake in 1895. Rev. Vincent 
Wehrle, O.S.B., had purchased the old public school and moved it across 
from the church. Farmers from around the county helped by digging and 
hauling stones to secure its foundation. The old school was renovated 
into a hospital with two wards and eleven private rooms. The hospital 
was named in honor of Wehrle--St. Vincent de Paul Hospital. Bishop 
Shanley dedicated the building on October 20, 1895, and the first 
patient was admitted on November 3, 1895.
    As the town grew, it was soon evident the size of the hospital was 
inadequate. The Sisters purchased eighty acres of land on the highest 
point in northeastern Devils Lake, and built a new hospital. The 
cornerstone of Mercy Hospital was laid in June of 1902, and the first 
patient was admitted on June 6, 1902. The new hospital had three wards 
and twenty-five private rooms.
    Through the years Mercy Hospital has re-invented itself to meet the 
changing needs of the times in health care. In 1974 Mercy Hospital was 
a 115 bed acute care hospital, in 1992 Mercy Hospital right-sized to 50 
acute care beds, and on January 9, 2008, became a 25 bed Critical 
Access Hospital, with a very active Emergency Department, seeing more 
than 950 patients per month.
    Just as the Sisters served the community, 106 years later we hold 
that commitment in trust. As a Catholic Health Initiatives hospital, we 
honor the mission the Sisters and CHI have entrusted to us.
Mercy Hospital Emergency Department and Spirit Lake Nation
    Mercy Hospital of Devils Lake, North Dakota is a 25 bed CAH located 
in an agriculturally based market. We serve a primary service 
population of approximately 15,000 people. Approximately twenty-five 
percent of the primary service population is Native Americans. This 
segment of the population presents special, significant, underfunded 
service requirements.
    Mercy Hospital has a high Medicaid payor mix related to a large 
local indigent population, and has faced long term non payment issues 
with Indian Health Services for the ED. Fort Totten has an I.H.S. 
clinic with limited hours of service with no after hours care available 
on week days, weekends, holidays and when providers are not present. 
Because the clinic hours are limited, the people of the Spirit Lake 
Nation often choose to use the Mercy Hospital ED, not only for trauma 
care, but their primary care. The burden to Mercy Hospital, however, is 
significant because I.H.S. pays only for Priority One care in the ED. 
We understand this and because of this non payment, a significant 
portion of total reported charity is rendered annually to this group of 
patients. We write off approximately $200,000 a quarter for ED care for 
I.H.S.
    On January 1, 2008, Mercy Hospital assumed responsibility of 
staffing the ED 24/7 when the physicians from the clinic in Devils Lake 
stated they would no longer cover the ED during their office hours. 
This increased our ED costs considerably to about $1 Million per year, 
increasing the burden of unpaid ED services provided.
    I had the privilege of speaking before the Committee on Indian 
Affairs field hearing in North Dakota on August 4, 2000. At that time 
I.H.S. was not adequately funded, and service to the Native Americans 
in our ED was about 40% of our total volume.
    In 2000 Mercy Hospital ED had 8,466 visits a year, and in 2007 the 
ED visits had increased to 11,123. To date in 2008 we see as many 
patients, with small increases.
Solutions
    I have been an employee of Mercy Hospital for 35 years, and the CEO 
since 1984. In the beginning of my tenure, when the bills were not 
paid, I turned to Senator Burdick to ask for help. As the years went by 
the unpaid dollars increased, and I then turned to Senator Dorgan and 
Senator Conrad. I do understand that I.R.S. does not pay for anything 
except Priority One in the ED. But, that leaves me in a difficult 
position, with the limited hours of the I.H.S. clinic being open. When 
there is a need, the people of the Spirit Lake Nation have nowhere to 
go except to the Mercy Hospital ED. We serve them because we are called 
to from our heritage, and Government regulations.
    (See attached report of Mercy Hospital Uncompensated Services to 
Native Americans 2001-2007)
    A few years ago I decided I needed to be a part of the solution, 
not a part of the problem, and began meetings. I have met with people 
at the I.H.S. Spirit Lake Health Center, Spirit Lake Tribal Council, 
the I.H.S. Aberdeen Area Office, and over the years I have had numerous 
meetings in Washington, D.C., as well.
    At one time the I.H.S. clinic was looking into staying open longer 
hours, their budget was several million because they would need to hire 
an entire new staff of physicians, nurses, lab and x-ray technologists, 
etc.
    The issues remain, and every time there is a suggestion, there is a 
roadblock by I.H.S. or the Government.
    I have no where else to go, except to you, for help. It is my 
responsibility to ensure that Mercy Hospital remains open to serve the 
people of the Lake Region, which certainly includes members of the 
Spirit Lake Nation. We have a close relationship with many of the 
tribal members as they were born at our hospital, and through the years 
they have put their trust in us. We appreciate this and consider it an 
honor. We also know a solution must be found so that we can continue to 
serve.
Conclusion
    I believe we can all agree there is a problem with expected care 
and payment. It may be my pragmatism, but I believe we, you and I, the 
Government and Mercy Hospital, have a shared responsibility to see that 
the people of the Spirit Lake Nation have access to health care 24/7, 
and that Mercy Hospital is compensated.
    After considerable thought, recalling all the avenues I have tried, 
I believe it is necessary for I.H.S. to contract with Mercy Hospital 
for $500,000 per year for after hours care. The needs of the Spirit 
Lake Nation and Mercy Hospital would be met, and Mercy Hospital would 
still be providing their share of charity care.
    Thank you for hearing my story, and for any assistance you can 
provide.




    The Chairman. Ms. Krein, thank you very much. We appreciate 
your being here today.
    Next, we will hear from Stacy Dixon, the Chair of the 
Susanville Indian Rancheria in Susanville, California. Chairman 
Dixon will share his tribe's experience with the shortage of 
Contract Health Service funding, which led their tribe to start 
charging tribal members a co-pay for some services.
    Chairman Dixon, thank you very much for being here. You may 
proceed.

    STATEMENT OF HON. STACY DIXON, CHAIR, SUSANVILLE INDIAN 
                           RANCHERIA

    Mr. Dixon. Thank you, Mr. Dorgan. Good morning. Thank you 
for the opportunity to be here today.
    My name is Stacy Dixon. I am the Tribal Chairman of the 
Susanville Indian Rancheria, a federally recognized Indian 
tribe located in Susanville, California.
    I am pleased to testify about a topic of great importance 
to my tribe: the severe under-funding of Contract Health 
Service in Indian Country. Health care to eligible 
beneficiaries who reside in our geographic area is provided out 
of the Lassen Indian Health Center, a small health care 
facility built and owned by the tribe located on the Susanville 
Indian Rancheria. The tribe has been providing health service 
at the Lassen Indian Health Center under an Indian Self-
Determination and Education Assistance Act agreement since 
1986.
    In 2007, the tribe and the Indian Health Service entered 
into a self-governance agreement under Title V of the Act. Like 
most of the other tribes, we have struggled to achieve and 
maintain a high level of health care service, despite chronic 
under-funding, especially of CHS funds. CHS, like the rest of 
IHS-funded programs, is extremely under-funded. Conservative 
estimates are that Congress would need to appropriate an 
additional $333 million per year to meet unmet CHS needs 
nationally. When added to the current IHS budget line item for 
CHS, the CHS budget should be no less than $900 million.
    Lack of adequate CHS funding has led to health care 
rationing and barriers to access to care because there are 
simply no enough appropriated funds to meet all needs. Patients 
eligible for CHS who do not get approved for funding are left 
with a choice between having to pay for service themselves or 
not getting the service they need.
    The impact of CHS under-funding has been particularly 
devastating in California. In the 1950s, during the termination 
period, the Federal Government withdrew all Federal health care 
service to Indians in California. Health care services to 
Indian beneficiaries resumed in 1969. As a result of this 
unique history, none of the facilities and programs that tribes 
use to carry out health care functions in California originated 
as facilities and programs previously operated by the IHS. 
There are also no IHS hospitals in California. Tribes have been 
forced to rely heavily on the CHS programs to pay for specialty 
and in-patient care.
    In 1986, when my tribe took over the delivery of health 
care services, our goal was simple: to provide the best 
possible health care to our people. We wanted to provide a 
continuum of care to our patients that would include as many 
possible health services to one location as possible so that 
the care provided by physicians who are providers that could be 
integrated and coordinated.
    The challenge that we have faced with our pharmacy program 
are an illustration of the impact that CHS under-funding and 
IHS under-funding in general has on tribal health programs and 
tribal sovereignty. For many years, the tribe tried to operate 
its pharmacy program using funds diverted from other health 
purposes. The tribe had to close the pharmacy between January 
of 2004 to June of 2005 because it concluded that it could not 
afford to do that. During this time, prescription drugs had to 
be purchased from local pharmacies.
    To pay for these retail pharmacy services, the tribe used 
its already limited CHS funds. While the tribe was providing 
pharmacy service with the CHS funds, it had to make significant 
cuts in the CHS service that it had been providing. Some of the 
services that we could no longer provide include services such 
as CT scans, MRIs, podiatry exams, cardiac evaluations, and 
colonoscopys.
    In 2005, the tribe decided that the problems associated 
with using already-scarce CHS funds to pay for pharmaceutical 
supplies off-site and the other negative consequences of not 
having a pharmacy on-site could only be corrected by reopening 
the on-site pharmacy. The tribe resumed pharmacy operations in 
July of 2005. It immediately was able to once again use CHS 
funds to pay for needed CHS services.
    After much study and analysis, the tribe determined that 
the only to run a financially viable in-house pharmacy program 
without jeopardizing the CHS funding needed for the other 
critical services was to charge a small co-pay of $5, along 
with the acquisition cost of the medicine to those patients who 
could afford it. Indigent and elderly patients are exempt from 
these charges. The tribe implemented these policies in July of 
2006.
    Unfortunately, the tribe pharmacy policy became a focus of 
a lawsuit between the IHS and the tribe and remains a lightning 
rod today in the legal and policy debate about what legal 
authority tribes have to supplement health care funding they 
receive from IHS. This January, a Federal judge upheld the 
legality of our pharmacy policy and affirmed the tribe's right 
to determine for itself whether to charge beneficiaries for 
services at a tribally operated program.
    The IHS did not appeal the judge's decision, yet IHS staff 
is convinced it was wrong. Recently, they have told tribes 
around the Country that they do not plan to follow the 
Susanville decision, that it does not constitute precedent that 
IHS has to follow. They have even gone so far as threaten to 
cut the funding of any tribe that charges beneficiaries. As 
quoted in an article last week in Indian Country Today, a high 
IHS official called tribal billing inappropriate and said the 
IHS is contemplating terminating the relationship with tribes 
that have been discovered to be doing so.
    The IHS and tribes agree on one important thing. When the 
Federal Government fails to meet its trust responsibility by 
chronically under-funding CHS and other areas of IHS budget, it 
is inappropriate to force Indian beneficiaries to shoulder part 
of the burden by allowing IHS to charge the very people to whom 
it owes the trust duty. Recognizing this, Congress prohibited 
the IHS from charging beneficiaries through the ISDEAA. 
Congress also recognized the flip-side of this coin, however: 
Tribes are sovereign governments that have the right to decide 
how best to carry out the health care programs for their people 
and to supplement any inadequate Federal funding by any and all 
reasonable means. While the decision whether to charge tribal 
members and other beneficiaries is not appealing, it is a 
choice Congress has left to tribes in the exercise of their 
right of self-governance.
    I can assure you that my tribe would prefer not to charge 
eligible beneficiaries for any portion of the costs of 
providing health care to them. However, I firmly believe in the 
right of all tribes to make that decision themselves, rather 
than it being made for them by the IHS.
    Ironically, we would not be having these disagreements with 
IHS if Congress fulfilled its trust responsibility to Indian 
people and address the larger crisis of chronic IHS program 
under-funding. If IHS and other IHS programs were adequately 
funded, tribe would not be forced to consider charging 
beneficiaries in the first place.
    I urge the Committee to work on making sure that CHS and 
other Indian health programs are fully funded. Thank you for 
the opportunity to testify on these important issues vital to 
the well being of my tribe and of Indian Country.
    Thank you.
    [The prepared statement of Mr. Dixon follows:]

   Prepared Statement of Hon. Stacy Dixon, Chair, Susanville Indian 
                               Rancheria
    Good morning. Thank you for the opportunity to be here today. My 
name is Stacy Dixon. I am the Chairman Susanville Indian Rancheria, a 
Federally-recognized Indian tribe whose reservation is located in 
Susanville, California, a small community located about 85 miles from 
Reno, Nevada. I am pleased to testify about a topic of great importance 
to my Tribe: the severe underfunding of Contract Health Services in 
Indian country.
    Let me begin by providing a little background on my Tribe's health 
care delivery system. Health care to eligible beneficiaries who reside 
in our geographic area is provided out of the Lassen Indian Health 
Center (LIHC), a small rural health care facility located on the 
Susanville Indian Rancheria. The Tribe has been providing health 
services through the LIHC to tribal members and other eligible 
beneficiaries under an Indian Self-Determination and Education 
Assistance Act (ISDEAA) agreement since 1986. In 2007 the Tribe and the 
Indian Health Service (IHS) entered into a self-governance agreement 
under Title V of the ISDEAA. Like most other tribes, we have struggled 
to achieve and maintain a high level of health care services despite 
chronic underfunding, especially of Contract Health Services (CHS) 
funds.
    As you are aware, CHS funds are used to supplement and complement 
other health care resources available at IHS or tribally operated 
direct health care facilities. Under the CHS program, primary and 
specialty health care services that are not available at IHS or tribal 
health facilities are purchased from private and public health care 
providers. For example, CHS funds are used when a service is highly 
specialized and not provided at the IHS or tribal facility, or cannot 
otherwise be provided due to staffing or funding issues, such as 
hospital care, physician services, outpatient care, laboratory, dental, 
radiology, pharmacy, and transportation services.
    CHS, like the rest of IHS funded programs, is extremely under-
funded. \1\ Based on FY 2007 data, the Northwest Portland Area Indian 
Health Board (NPAIHB) conservatively estimates that Congress would need 
to appropriate an additional $333 million per year to meet unmet CHS 
needs nationally. When added to the current IHS budget line item 
($588,161,000 million is requested for FY09) for CHS, the CHS budget 
should be no less than $900 million. The CHS program is also greatly 
affected by medical inflation, as the costs are not controlled by the 
IHS or by tribal health care providers, but are determined by the 
private sector health care environment.
---------------------------------------------------------------------------
    \1\ U.S. Comm'n on Civil Rights, A Quiet Crisis: Federal Funding 
and Unmet Needs in Indian Country at 49 (July 2003) (concluding that 
``the anorexic budget of the IHS can only lead one to deduce that less 
value is placed on Indian health than that of other populations'').
---------------------------------------------------------------------------
    The lack of adequate CHS funding has led to health care rationing 
and barriers to access to care because there are simply not enough 
appropriated funds to meet all needs. In expending limited CHS 
resources, the IHS and tribal health care providers use a strict 
medical priority system. Most IHS Areas lack enough CHS funds to even 
pay for medical priority one--emergent and acutely urgent care 
services. These services are ones necessary to prevent the immediate 
death or serious impairment of health--so called ``life or limb 
emergencies.'' Any medically-necessary health care services that are 
needed but do not reach that priority status, such as priority two 
preventive care, priority three chronic primary and secondary care or 
priority four chronic tertiary care, are put on a deferred list and are 
not approved for payment unless funding becomes available. If no 
funding becomes available, payment is denied and the patient's 
condition goes untreated unless he/she has an alternate resource such 
as Medicare or Medicaid, or can afford to pay for the care him/herself.
    According to the IHS in its FY 2007 CHS Deferred and Denied 
Services report, IHS programs denied care to 35,155 eligible cases 
because they were not within medical priority one, representing a 9% 
increase in denials over the previous year. Many tribally operated 
health programs no longer track deferred or denied CHS services because 
of the expense of doing so, meaning that figure is understated, 
particularly in California where there are no direct care programs 
operated by IHS, and would be higher if all CHS data from tribal 
programs were available.
    Patients eligible for CHS but who do not get approved for funding 
are left with an unconscionable choice between having to pay for the 
service themselves (many cannot afford to even consider that option) or 
not getting the services they need. In the Susanville Indian 
Rancheria's experience, many tribal beneficiaries do not even visit 
health facilities when they expect CHS to be denied, which adversely 
impacts their overall health status.
    The impact of CHS underfunding on access to health care has had a 
particularly devastating impact in California. To fully grasp the 
extent of CHS under-funding in our state, it is helpful to first 
understand the history of health services in California and tribes' 
efforts to bring about equity in funding. This history is unique within 
the U.S. Indian Health Service system.
    In the 1950's, as part of the termination of tribes' special status 
across the United States, the Bureau of Indian Affairs (which was 
responsible for health care until that responsibility was transferred 
to the U.S. Public Health Service in 1954) withdrew all federal health 
services from Indians in California. Studies of the health status of 
California Indians in the late 1960s revealed that their health was the 
worst of any population group in the State. The routine health services 
available to Indians through the IHS in other states were not 
accessible or available to Indians in California. At the urging of the 
tribes in California through the work of the California Rural Indian 
Health Board and the State of California, at the direction of Congress 
the IHS began to restore federally provided health care services for 
Indians living in California in 1968--but through tribally owned and 
managed health programs rather than direct services from the Federal 
Government. Funding was insufficient and the programs grew slowly.
    Indians in California were left out of the IHS's growth that 
occurred between 1955--when the U.S. Public Health Service began 
discharging its responsibility for Indian health care--and 1969--when 
the IHS again assumed responsibility for Indian health care services in 
California. To address that shortfall and force the issue of equitable 
care, Tribes filed a class action against the IHS. In Rincon Band of 
Mission Indians v. Harris, \2\ the Ninth Circuit Court of Appeals 
ordered the IHS to provide California Indians with the same level and 
scope of services that it provides to Indians elsewhere in the United 
States. Despite winning this victory, California tribes continued to be 
short-changed: the IHS distributed only $13.7 million to California 
tribes out of the $37 million in additional funding Congress originally 
appropriated to address IHS funding inequities following the Rincon 
decision. The IHS never fundamentally altered its funding allocation 
method, and California tribal health programs have remained chronically 
under-funded.
---------------------------------------------------------------------------
    \2\ Rincon Band of Mission Indians v. Harris, 613 F.2d 569 (9th 
Cir. 1980).
---------------------------------------------------------------------------
    According to the Advisory Council on California Indian Policy 
(ACCIP), in a report and recommendations made to Congress in September 
1997, IHS service population figures for 1990 to 1995 show that 
California was the fifth largest Area out of the twelve IHS Areas, but 
ranked third lowest in per capita IHS funding levels.
    Today, many tribes in California have taken on the responsibility 
for developing and operating health care facilities pursuant to the 
ISDEAA. None of the tribal facilities and programs in California 
originated as facilities and programs previously operated by the IHS, 
as is the situation in most of the other IHS Areas. California tribal 
health programs were never built or staffed under the IHS system, there 
are no IHS inpatient facilities in California and the IHS provides no 
direct care services in California. Without having had such 
infrastructure and services in place, IHS was unable to base the amount 
of funds for tribally-operated health care in California on the amount 
IHS itself had spent. This is the funding calculation methodology used 
in many other Areas and is required by the ISDEAA.
    There are no IHS hospitals in California. Thus, tribal providers 
rely heavily on the CHS program to fund specialty and inpatient care. 
When CHS resources are exhausted, Indian beneficiaries in California 
have no recourse. IHS facilities can rely on their specific Area 
Offices to assist them with a major crisis that requires additional 
CHS, where in a true emergency the Area Offices can shift funds or ask 
IHS Headquarters for assistance. The California Area Office, however, 
does not have reserves or other ability to shift funds between and 
among already inadequately funded tribal programs.
    In its September 1997 report, ACCIP determined that the California 
CHS budget as of that time was the lowest in the entire IHS system at 
$114 per user, compared to $388 per user in the Portland Area, which 
also lacks IHS hospitals. California received $7,085,200 in CHS funds 
for FY 1995 compared to $16 million and $28 million provided to the 
Bemidji Area and the Billings Area, respectively, which have similar 
user populations to that of California. ACCIP determined that the CHS 
funding shortfall for California was $8 million in 1997. Now more than 
ten years later, that figure is no doubt considerably higher. Recently, 
research done by the California Rural Indian Health Board which matched 
data for the IHS Active User population in California with data from 
the California Hospital Discharge Data set identified $19,355,000 in 
unfunded hospital care for the year 2007. That number does not address 
other needs such as diagnostic services, specialty care and pharmacy 
services.
    With respect to California beneficiaries, the IHS's FY 2005 CHS 
Deferred and Denied Services report shows that IHS programs deferred 
payment for services for 2,611 eligible cases and denied care to 519 
eligible cases that were not within the medical priority. The report 
for 2006 indicates that the number of eligible cases denied care in 
2006 in the California Area rose to 841. As mentioned above, these 
figures understate the problem given that there are no IHS direct care 
providers in California and tribal programs do not all track this type 
of data.
    In 1995, the Susanville Indian Rancheria undertook a comparison 
analysis to look at three IHS Indian Health Centers--one each in 
Arizona, Utah and Oregon--to review similarities and differences 
between them and the tribally operated LIHC in California, with respect 
to CHS and other IHS funding. The comparison facilities were all IHS-
operated and had similar staffing, workloads and service populations 
(one facility had a service population slightly lower than the LIHC's). 
By doing that comparison, we discovered that the IHS health facilities 
had considerably more resources. For example, the LIHC had a CHS budget 
in FY 1994 of $93,000, compared to the much higher budgets for the 
comparison facilities in the same period: $770,125, $629,224 and 
$1,371,156. Even taking into account differences in the service 
population, the funding levels should have been somewhat similar for 
similar workload and number of active users. Our comparison showed what 
we already knew, which is that the IHS resource allocation methodology 
has consistently demonstrated a bias toward larger facilities and 
toward IHS facilities rather than tribally operated facilities.
    In 1986, when the Tribe took over the responsibility to deliver 
health care services, our goal was simple: provide the best possible 
health care to our people. One important aspect of that goal was to 
provide a continuum of care, including as many possible health services 
in one location so that care provided by physicians and other providers 
could be integrated and coordinated. We firmly believe that the 
continuum of care approach provides the highest quality health care for 
the patients served.
    Key to our continuum of care approach is the provision of on-site 
pharmacy services. This allows our patents to obtain direct counseling 
on the use of prescription drugs being dispensed and to obtain 
necessary drugs at a low cost as part of an integrated health program. 
The challenges that we have faced with our pharmacy program provide a 
vivid illustration of the impact that CHS under-funding--and the IHS's 
under-funding in general--on tribal health programs and barriers to 
access to care problems.
    Historically the IHS has never provided the Tribe with any funds 
specifically to operate its pharmacy program or, for that matter, to 
purchase pharmacy supplies. In fact, the Tribe receives today only 
about one-half the funds from the IHS that are needed to carry out the 
Tribe's health programs. To compensate for this chronic lack of funding 
the Tribe has made decisions to reallocate available funds, redesign 
programs, and seek additional resources (thought third party 
reimbursements, Medicare and Medi-Cal reimbursements, and even through 
tribal contributions from its own funds) to fund the health care needs 
of its beneficiary population.
    For many years, the Tribe attempted to operate its pharmacy program 
using a substantial amount of funds diverted from other health purposes 
at a significant cost to the Tribe. The Tribe had to close the pharmacy 
between January 2004 and June 2005 because it concluded that it could 
not afford to operate the pharmacy any longer. During this time, 
prescription drugs had to be obtained from a local pharmacy, where the 
Tribe's patients experienced long waiting lines to receive their 
medications, errors in prescribing the correct drug, and prescriptions 
being given to the wrong patients. The Tribe also experienced a drop in 
patient visits, which was directly related to the Tribe having no on-
site pharmacy and the disruption of services through its continuum of 
care.
    To pay for these retail pharmacy services while the LIHC on-site 
pharmacy was closed, the Tribe used its already limited CHS funds. 
Obtaining prescription medications outside of the Tribe's facility was 
not only more inconvenient for the Tribe's patients and interfered with 
the continuum of care, but the cost for billing and administration in 
working with retail pharmacies was significant. The Tribe did not (and 
still does not) have enough CHS resources to pay for pharmaceuticals 
through retail pharmacies.
    Each dollar of CHS funds used for pharmacy services is a dollar 
that cannot be used for other critically needed CHS-funded services. 
When using CHS for pharmacy services, the cost of the pharmaceuticals 
is higher than it would be in a direct care environment, because 
outside retail pharmacies do not want to provide federal discount 
pharmaceutical pricing to the Tribe. Moreover, given the dramatic rise 
in the cost of pharmaceuticals over the past several years, and the 
continuing trend of substantial increases in price, we concluded that 
in a short time all of the CHS dollars available to the Tribe would 
have been spent on pharmaceuticals, meaning no CHS dollars would have 
been available for other critical CHS services.
    While the Tribe was providing pharmacy services through CHS, it had 
to make significant cuts in other CHS services that it had been 
providing. For example, the Tribe could only cover CHS priority level 
one for medical and CHS priority levels one through four for dental. In 
2005 the tribe decided that the problems associated with not having a 
pharmacy on-site could only be corrected by re-opening the on-site 
pharmacy. When the Tribe resumed pharmacy operations in July 2005, the 
Tribe was able to once again use CHS funds to meet the growing backlog 
of needed CHS services for medical and dental care.
    In CY 2006, the Tribe supplemented approximately $908,458 of tribal 
third-party funds to operate its IHS programs. The Tribe operated its 
pharmacy that year at a net loss of $18,007.08. In many of the previous 
years, the losses were greater than $100,000. Because the IHS provides 
the Tribe with no funds specifically for its pharmacy program and the 
Tribe's other health programs are severely under-funded by the IHS, 
every dollar the Tribe receives through its ISDEAA agreements and 
through third-party resources such as Medicare and Medi-Cal, are very 
carefully managed. There are no excess revenues or available funds the 
Tribe can reallocate to provide pharmacy services without hurting other 
health programs.
    After much study and analysis, the Tribe determined that the only 
way to run a viable in-house pharmacy program without jeopardizing the 
CHS needed for other critical services was to charge a small co-payment 
($5.00) along with the acquisition cost of the medicine to those 
patients who could afford it. Indigent members and elders are exempt 
from this charge. The Tribe implemented this policy in July 2006.
    The Tribe's Pharmacy Policy, made necessary by chronic CHS 
underfunding, became the focus of a lawsuit between the IHS and the 
Tribe and remains a lightning rod today in a legal and policy debate 
about the means available to tribes to supplement their health care 
funding. The decision in Susanville Indian Rancheria v. Leavitt upheld 
our Pharmacy Policy and affirmed a tribe's right to determine for 
itself whether to charge beneficiaries for services at a tribally-
operated program. Disturbingly, this decision in favor of tribal self-
governance has led the IHS in recent weeks to threaten to revoke the 
ISDEAA funding of other tribes that decide to charge beneficiaries.
    Despite the fact that the IHS had never provided the Susanville 
Tribe with funds specifically for pharmacy services, for many years the 
Tribe had included a pharmacy services program in its ISDEAA agreement. 
In 2006, after the Tribe was admitted into the Title V self-governance 
program, it began negotiating with the IHS for a self-governance 
compact and funding agreement for Calendar Year 2007.
    The Tribe's proposed agreement included pharmacy services, but said 
nothing about its co-pay policy. IHS negotiators, however, learned of 
the Pharmacy Policy, and informed the Tribe of the IHS's position that 
the Tribe could not charge eligible beneficiaries for pharmacy 
services. The IHS gave the Tribe two choices: (1) delete pharmacy 
services from the agreements entirely, or (2) include language in the 
contract stating the Tribe would not charge eligible beneficiaries for 
pharmacy services. The Tribe refused to accept either of these options 
and presented IHS with a final offer that included pharmacy services.
    The IHS rejected the Tribe's proposal on two primary grounds. 
First, the IHS argued that the Secretary lacks authority to enter an 
agreement to do something that the Secretary cannot do--namely, charge 
beneficiaries for services. Second, the IHS argued that the Tribe's co-
pay policy would result in a ``significant danger or risk to public 
health''.
    The Tribe appealed the IHS rejection decision to federal district 
court in the Eastern District of California. The court found that the 
IHS's public health argument failed because the agency cited only 
speculative risks that did not meet the agency's burden of proof under 
the ISDEAA. The court then addressed the IHS's argument that the Tribe 
could not charge because the IHS cannot charge. This issue turned on 
the interpretation of Section 515(c) of Title V of the ISDEAA, which 
provides as follows:

        The Indian Health Service under this subchapter shall neither 
        bill nor charge those Indians who may have the economic means 
        to pay for services, nor require any Indian tribe to do so. \3\
---------------------------------------------------------------------------
    \3\ Pub. L. 93-638, Title V, Sec. 515(c), as added Pub. L. 106-260, 
Sec. 4, Aug. 18, 2000, 114 Stat. 711, codified at 25 U.S.C. 
Sec. 458aaa-14(c) (emphasis added).

    The Court decided that this provision prohibits the IHS from 
charging--for good reason, as it would directly violate the federal 
trust responsibility--but that it does not prohibit tribes from doing 
so.
    The court also rejected the IHS argument that the agency cannot 
approve an ISDEAA agreement under which a tribe will conduct activities 
(such as billing) that the IHS itself has no legal authority to carry 
out. The court pointed out that, ``[a]s Title V makes clear, the Tribe 
is not required to operate a [program] in the same manner as the IHS.'' 
Tribes are not federal agencies, which can only do what Congress 
authorizes them to do. Tribes retain inherent authority beyond that 
delegated by Congress.
    Events subsequent to the Susanville decision are troubling and 
bring into question the IHS's understanding of tribal rights to self-
governance. Despite the Susanville decision--and the plain language of 
the ISDEAA on which the decision was based--the IHS has sought to 
prohibit tribes (other than our Tribe) from charging eligible 
beneficiaries. The IHS did not appeal the Susanville decision, yet the 
agency insists the court was wrong and has not heeded its ruling. In a 
series of recent ``consultation'' sessions with tribes in various 
regions, the IHS has stated that the Susanville decision is limited to 
one tribe, and does not constitute binding precedent. The agency made 
clear that ``the existing IHS policy, which prohibits Tribes from 
charging eligible beneficiaries, remains unchanged.''
    In fact, the IHS has threatened to cut the funding of any tribe 
that charges beneficiaries (again, except for Susanville). As quoted in 
an article last week in Indian Country Today, an IHS official called 
tribal billing ``inappropriate'' and said the IHS is ``contemplating 
terminating relationships with tribes that have been discovered to be 
doing so.'' \4\
---------------------------------------------------------------------------
    \4\ Rob Capriccioso, IHS Considers Stopping Funds for Tribe 
Requesting Patient Copays, INDIAN COUNTRY TODAY (June 20, 2008).
---------------------------------------------------------------------------
    But the IHS and tribes agree on at least one thing: When the 
federal government fails to meet its trust responsibility, as it has by 
chronically underfunding CHS (and other areas of the IHS budget), it is 
inappropriate to force Indian beneficiaries to shoulder part of the 
burden by allowing the IHS to charge the very people to whom it owes 
the trust duty. Recognizing that this is so, Congress has flatly 
prohibited the IHS from billing or charging in the Title V provision at 
issue in the Susanville case and quoted above. Congress also recognized 
the flip side of this coin, however: Tribes are sovereign governments 
that have the right to decide how best to carry out health care 
programs for their people and to supplement inadequate federal funding 
by any and all reasonable means. While the decision whether to charge 
tribal members and other beneficiaries is not appealing, it is a choice 
Congress has left to Tribes in the exercise of their right of self-
governance.
    The Susanville Indian Rancheria--just like many other tribes--would 
prefer not to charge eligible beneficiaries for any portion of the cost 
of providing health care to them. Doing so forces hard choices for 
individuals and tribes alike, and should be unnecessary given the 
Federal Government's trust responsibility to provide the highest 
possible level of health care services to Native peoples, or provide 
sufficient resources for tribes to do so.
    Many, perhaps most, tribes have no plans to charge beneficiaries 
for health care services under any circumstances. Nonetheless, the 
tribal leaders I have heard from strongly support the right of Tribes 
and tribal organizations to make that decision themselves rather than 
have it made for them by the IHS. We believe that the IHS should 
abandon its contrary position, which comports neither with the law nor 
the policy of self-governance, and instead work with Tribes to find 
ways to ensure that sufficient funds are provided to tribal programs so 
that they do not need to consider billing beneficiaries. Even more 
important, we urge Congress to address the larger crisis of chronic CHS 
underfunding so that tribes do not even have to consider charging 
beneficiaries in the first place.
    Thank you for the opportunity to testify on these important issues 
vital to the well-being of Indian country.

    The Chairman. Chairman Dixon, thank you very much for being 
here and sharing your experience.
    Next, we will hear from the Lieutenant Governor of the 
Chickasaw Nation in Oklahoma, Jefferson Keel. Mr. Keel will 
discuss the challenges his tribe faces.
    Thank you for being here.

         STATEMENT OF HON. JEFFERSON KEEL, LIEUTENANT 
  GOVERNOR, CHICKASAW NATION; FIRST VICE PRESIDENT, NATIONAL 
                  CONGRESS OF AMERICAN INDIANS

    Mr. Keel. Thank you, Mr. Chairman, members of the 
Committee. Senator Johnson, it is good to see you back.
    On behalf of the Chickasaw Nation and the National Congress 
of American Indians, which I serve as the First Vice President, 
I am honored to be asked to provide testimony on this important 
issue, particularly around the complex issue of contract health 
services. You have our testimony for the record, and I will 
provide a brief summary.
    As you know, the Chickasaw Nation is a self-governing 
tribe. However, on behalf of the National Congress of American 
Indians, and as Sally Smith has said, I must express our 
concern that our Direct Service Tribe, our member of the Direct 
Service Tribes, has not been asked to provide testimony. 
Considering the enormity of this issue, it would be helpful 
that the Committee would seek out additional testimony to 
address their concerns.
    Today, I would like to talk about some of the emergency 
issues tribes must face due to the rationing of health care 
created by the under-funding of Contract Health Services. I 
will conclude with six recommendations to the Committee that I 
would ask that they consider.
    In 1995, the Chickasaw Nation assumed control of the Indian 
Health Service Program at the Ada, Oklahoma service unit under 
a self-governance compact. At that time, the Indian Health 
Service owed millions of dollars for contract care due to their 
lack of payment and because they would not refuse authorization 
of services due to lack of funds. This built up to the point 
where there were several million dollars that were still owed, 
and it took some time to get those paid off.
    Faced with growing medical inflation rates, the increased 
expense of providing services in a rural area, a rapidly 
increasing Indian population, and limited competitive pricing, 
our tribe's only option is to require strict adherence to a 
medical priority system. You have seen what that system is.
    These covered services are generally used for emergency 
care or the treatment of life-threatening conditions only. 
Medical needs falling outside of the priority system are not 
funded. Our situation is difficult and challenging. Do we cover 
one catastrophic hospitalization, resulting after a car wreck 
in another city? Or do we use those same funds to provide 
treatment for heart disease or cancer or other life-threatening 
illnesses?
    For example, cataract removal is one of the most common 
operations performed in the United States. It is also one of 
the safest and most effective types of surgery. In about 90 
percent of the cases, people who have cataract surgery have 
better vision afterwards. We are unable to provide cataract 
surgery as a covered service, leaving untold numbers of elders 
in our tribe, just our tribe alone, in an unnecessary dependent 
state.
    Another example, just last week, a Tribal citizen, who is a 
heart patient, came to our facility with an emergency-type 
situation. Under ordinary circumstances, we have an arrangement 
with the Oklahoma Heart Hospital in Oklahoma City where we are 
able to refer that patient and they receive treatment and we 
provide payment under the Medicare rates. However, if that 
hospital is full or at capacity, as it was last week, then they 
would not accept that patient for the Medicare rates. 
Consequently, he was not able to receive adequate treatment. We 
had to make other arrangements. The bottom line is that because 
of a lack of adequate funding for Contract Health Services, our 
people often must accept second-class health care treatment.
    In light of the crisis situation we are facing, we propose 
the following recommendations.
    Number one, extend Medicare-like rates to the ambulatory 
setting. Extension of Medicare-like rates to the out-patient 
setting will be cost-neutral and allow tribes to extend 
Contract Health Services funding even further. We would request 
that when this program is implemented that it is created in a 
manner that it does not cut off or limit the current supply of 
medical providers.
    Two, reduction of administrative overhead within the Indian 
Health Service. The reduction in administrative costs should 
include departmental-imposed administrative paperwork, systems 
and programs, as well as limit the dollar amount of resources 
that may be utilized for administrative costs versus cost to 
directly fund health care.
    Number three, work with tribes to fund proactive procedures 
currently denied under Contract Health Services. For example, 
funding bariatric surgery would directly impact the patient's 
quality of life and life span. Obesity is an important risk 
factor for cardiovascular disease and diabetes, which are 
chronic diseases that affect a disproportionate number of 
American Indians today. New studies demonstrate a direct 
correlation between the bariatric surgery and a cure for the 
patient's type II diabetes. These patients are routinely off 
diabetic medication by the time they are discharged from the 
hospital. Additionally, many patients are able to discontinue 
medication for high blood pressure and cholesterol.
    Number four, adequately fund Indian Health Service and the 
services provided by Contract Health Service. Tribes should not 
be forced to make decisions regarding the health and oftentimes 
lives of their members due to inadequate funding of Contract 
Health Service programs. The National Congress of American 
Indians passed a resolution at our May, 2008 mid-year 
conference in Reno, Nevada in support of an additional 
appropriation of $1 billion for the Indian Health Service, to 
be used in part to address under-funding of services provided 
by Contract Health Service programs.
    Number five, remove the new CMS documentation requirements. 
The historic practice of accepting tribal membership or 
Certificate of Degree of Indian Blood as proof of citizenship 
should be accepted for the indigenous people of our country.
    Number six, benefits of Contract Health Services Delivery 
Area. At a minimum, the American Indians who reside in our 
geographic service unit area and are Contract Health Service-
eligible should qualify for emergency and life-threatening 
treatments.
    Thank you for your dedication to Indian Country, Senator, 
and for taking the first steps to examining this difficult 
issue. We are aware that there are hurdles we must face when 
confronting Contract Health Service programs, as well as other 
health care issues in this Country, for instance 
reauthorization of the Indian Health Care Improvement Act, as 
you have mentioned.
    We thank you in advance, and we look forward to working 
with you, and I will be happy to answer any questions at a 
later date. Thank you.
    [The prepared statement of Mr. Keel follows:]

    Prepared Statement of Hon. Jefferson Keel, Lieutenant Governor, 
 Chickasaw Nation; First Vice President, National Congress of American 
                                Indians
    On behalf of the Chickasaw Nation and the National Congress of 
American Indians (NCAI), I am honored to present testimony to the 
Senate Committee on Indian Affairs for the hearing on Contract Health 
Services.
    NCAI is the oldest and largest American Indian organization in the 
United States. NCAI was founded in 1944 in response to termination and 
assimilation policies that the United States forced upon the tribal 
governments in contradiction of their treaty rights and status as 
sovereign governments. Today NCAI remains dedicated to protecting the 
rights of tribal governments to achieve self-determination and self-
sufficiency.
Contract Health Services
    Under the Contract Health Service (CHS) program, primary and 
specialty health care services that are not available at Indian Health 
Service (IHS) or tribal health facilities may be purchased from private 
sector health care providers. This includes hospital care, physician 
services, outpatient care, laboratory, dental, radiology, pharmacy, and 
transportation services.
    The Indian Health Service (IHS) is the Payor of Last Resort. This 
means that patients are required to exhaust all health care resources 
available to them from private insurance, state health programs, and 
other federal programs before IHS will pay through the CHS program. The 
results of this policy have been devastating in Indian Country.
    Considering the astronomical medical inflation rates experienced 
while providing services in a rural area along with an increasing 
Indian population and limited competitive pricing, the Tribe's only 
option is to require strict adherence to a medical priority system. 
These covered services are generally used for emergency care or the 
treatment of life threatening conditions. Medical needs falling outside 
the priority system are not funded.
    The resulting rationing of health care creates numerous emergency 
issues for the Tribes. Principal among them:

        The creation of a priority system, in which patients who are 
        not facing life or limb threatening conditions are denied 
        referral to a private provider for medical attention from the 
        IHS;

        Patient billing issues arising from eligible tribal members 
        being denied payment for medical services provided by non-IHS 
        providers. Tribal members are left coping with credit problems, 
        a lack of ability to get future medical services, and often 
        times an unwillingness to seek preventive medical services;

        The ``don't get sick after June'' phenomenon in Indian 
        Country--or in some cases earlier--due to the underfunding of 
        CHS programs; and

        An ongoing dilemma in the maintenance of adequate record 
        keeping for referrals and denials and medical services.

Inadequate CHS Funding Forces Tough Choices
    At the present, less than one-half the CHS need is being met and 
the President's FY 2009 CHS budget request of $588 million. This 
discrepancy in funding means that some of the most basic and needed 
services that have the potential to dramatically improve quality of 
life for patients are routinely denied under existing CHS funding.
    In 1995 when the Chickasaw Nation took over the IHS program in the 
Ada Service Unit under a Self Governance compact, the IHS owed millions 
of dollars for contract care provided by local physicians and 
hospitals. This problem was caused when the IHS failed to pay its bills 
and would not refuse authorization of services due to lack of funds.
    Today Chickasaw Nation providers see in excess of $7 million 
dollars in unmet healthcare needs annually, forcing us to make the 
strategic decision to deny all emergency services that are not 
initiated by our health system. Our situation is difficult and 
challenging: Do we cover one catastrophic hospitalization resulting 
after a car wreck in another city, or do we use those same funds to 
provide treatment for heart disease or cancer?
    If a facility has a high number of vacancies in primary care areas, 
this will result in an increase in contract health resources. On the 
other hand, the more direct services that are provided by a facility 
translates into a decrease in contract health resources. The Chickasaw 
Nation has developed a method of using third party reimbursements to 
fund additional providers in our clinics. This allows us to see more 
patients and handle more medical needs. Unfortunately due to limited 
funds, we also do not have the benefit of providing the state-of-the-
art procedure and treatment for our patients:
    Upon diagnosis of breast cancer, the standard treatment for most 
American patients is a lumpectomy followed by chemotherapy and 
radiation. However, a total mastectomy without chemotherapy or 
radiation will have the same success rate and can be accomplished as a 
direct healthcare service. For this reason, this is the typical form of 
treatment within our clinics. Since CHS does not provide for 
reconstructive surgery, our mothers and daughters are forced to not 
only face this horrific disease, thus must go through with a curative 
surgery that will leave them disfigured for life.
    An Indian male with a diagnosis of prostate cancer typically has 
two treatment ``choices''. A radical prostatectomy reports good success 
but the surgery can result in erectile dysfunction and incontinence. A 
modified prostatectomy, TURP, followed by radioactive seed implants is 
a less invasive but a more expensive treatment choice. Due to the 
restrictions our clinics face with CHS, the first choice is most 
typically the treatment option.
    Cataract removal is one of the most common operations performed in 
the United States. It also is one of the safest and most effective 
types of surgery. In about 90 percent of cases, people who have 
cataract surgery have better vision afterward. We are unable to provide 
cataract surgery as a covered service, leaving untold numbers of elders 
in an unnecessary, dependent state.
    American Indians face some of the highest level of diabetes in the 
world; however, due to funding level restrictions, organ 
transplantation surgery is not covered. This means that corneal 
transplant is out of reach for our patients with diabetic retinopathy--
resulting in blindness. Patients with diabetic kidney disease are faced 
with a lifetime of hemodialysis with no hope of kidney transplant.
    Recent changes in federal laws have placed other burdens on an 
already burdensome and exhaustive citizenship documentation process. 
These new rules require applicants to provide certain documents to 
verify that they comply with rules governing citizenship and identity. 
States were notified of the new requirement on June 9, 2006, and the 
interim rule was published in the Federal Register on July 12, 2006. 
Oklahoma began implementation planning in January and operationalized 
the plan on July 1, 2007.

   Citizenship: Medicaid eligibility has long been restricted 
        to U.S. citizens and certain legal immigrants such as refugees.

   Identity: Identity is not an eligibility requirement, per 
        se, but individuals and parents are required to apply on behalf 
        of themselves and their children. In addition, applicants 
        already must provide Social Security numbers and information 
        regarding family income.

    The new laws require applicants, include those renewing their 
eligibility to document citizenship and identity through one of the 
following criteria:

   A primary document that verifies both citizenship and 
        identity, such as a passport or birth certificate or 
        naturalization; or

   Separate secondary documents, one verifying citizenship, 
        such as a birth certificate and another verifying identity such 
        as a driver's license or school picture ID.

    According to I.H.S. per capita funding formula, Oklahoma is one of 
the lowest funded of the 12 Indian Health Service areas. The new CMS 
documentation requirements have resulted in a 13 percent decline in the 
American Indian population enrolled in the Oklahoma State Medicaid 
program, of which 60 percent were American Indian children. Because of 
this decline, contract health expenditures have increased for all IHS/
Tribal/Urban programs. It would be safe to assume that most contract 
health service programs in Oklahoma are seeing a 13 percent increase in 
all contract health services expenditures.
    The Contract Health Services Delivery Area (CHSDA) is designed to 
allow for those American Indians who reside in a geographically service 
unit area to receive treatments. At a minimum, the American Indians who 
reside in our service unit area and who are CHS eligible will qualify 
for most emergency and life threatening treatment. However, there are 
hundreds of American Indians who reside outside the geographic service 
unit area which is normally sixty (60) miles, who routinely come to our 
clinics for treatment. Many of these patients live in Texas, and travel 
many miles to receive treatment. They do not qualify for CHS funding.
Recommendations
    1. Extend Medicare like rates (MLR) to the ambulatory setting. The 
application of MLR to inpatient CHS services had a direct impact for 
Tribes. The Chickasaw Nation saw an immediate 40 percent savings for 
some inpatient claims. Extension of MLR to the outpatient setting will 
be cost neutral and allow Tribes to extend CHS funding even further. We 
would request however that when a mechanism for applying MLR to 
outpatient services is devised, that it is created in a manner that 
does not cut off or limit the current supply of medical providers.

    2. Reduction of administrative overhead within the Indian Health 
Service. This reduction in administrative costs should include the 
departmental-imposed administrative paperwork, systems, programs, etc., 
as well as limit the dollar amount of resources that may be utilized 
for administrative costs versus cost to directly fund healthcare.

    3. Work with Tribes to fund certain proactive procedures currently 
denied under Contract Health Service funding. For example, funding 
bariatric surgery would directly impact the patient's quality of life 
and life span. Obesity is an important risk factor for cardiovascular 
disease and diabetes which are chronic diseases that affect a 
disproportionate number of American Indians today. New studies 
demonstrate a direct correlation between the bariatric surgery and a 
cure for the patient's type II diabetes. These patients are routinely 
off diabetic medication by the time they are discharged from the 
hospital. Additionally many patients are able to discontinue medication 
for high blood pressure and cholesterol.

    4. Adequately fund Indian Health Service and the services provided 
by Contract Health Service. Tribes should not be forced to make 
decisions regarding the health--and often times lives--of their members 
due to inadequate funding of CHS programs. NCAI passed a resolution at 
their May 2008 Mid Year conference in Reno, NV in support of an 
additional appropriations of $1 billion for the IHS to be used, in 
part, to address underfunding of services provided by the CHS program.

    5. Remove the new CMS documentation requirements. And the historic 
practice of accepting tribal membership or Certificate of Degree of 
Indian Blood (CDIB) as proof of citizenship be accepted for the 
indigenous people of our country.

    6. Benefits of CHSDA. As stated above, at a minimum, the American 
Indians who reside in our geographically service unit and are CHS 
eligible will qualify for most emergency and life threatening 
treatment.

Conclusion
    The Chickasaw Nation and NCAI commend the committee's dedication to 
Indian Country and for taking the first steps into examining this 
difficult issue. We are aware that there are hurdles we must face when 
confronting CHS programs--such as reauthorizing the long overdue Indian 
Health Care Improvement Act. We must however continue to stress that 
anything less than full and recurring funding of contract health 
services compromises the health and lives of those in our communities. 
By supporting us in these efforts, you will be ensuring that Tribes 
have the ability to deliver the highest quality services to their 
tribal members.

    The Chairman. Lieutenant Governor Keel, thank you very much 
for being with us.
    Next, we will hear from Linda Holt, the Chair of the 
Northwest Portland Indian Health Board, and a Suquamish Tribal 
Council Member in Washington State.
    Ms. Holt, thank you very much for being here. You may 
proceed.

STATEMENT OF HON. LINDA HOLT, CHAIR, NORTHWEST PORTLAND INDIAN 
                          HEALTH BOARD

    Ms. Holt. Thank you. Good morning, Chairman Dorgan and Vice 
Chairman Murkowski, and Senator Johnson. It is my honor to be 
here today to testify before your Committee.
    My name is Linda Holt. I am a Suquamish Tribal Council 
Member with the Suquamish Tribe in Washington State. I also 
serve as Chair of the Northwest Portland Area Indian Health 
Board. Our organization represents 43 tribes in the States of 
Washington, Oregon an Idaho. We serve a combination of Direct 
Service Tribes and self-governance tribes.
    I would just like to echo the concern of Ms. Smith and Mr. 
Keel that the Direct Service Tribes have not been invited to 
give input.
    The Chairman. Let me address that. We did try to get a 
Direct Service Tribe to this hearing. In fact, we were 
unsuccessful in doing that. We will have other hearings. In 
fact, Marlene Krein is testifying about her experience with the 
Direct Service Tribes, and Sally Smith represents an 
organization that also includes them. But we will have Direct 
Service Tribes at the next hearing. We tried at this hearing 
and it just didn't work out.
    Ms. Holt. Thank you.
    The Chairman. So it is not a matter of will. We will 
certainly get that done.
    Ms. Holt. Okay. Just for the record also, there is a Direct 
Service Tribes meeting in Spokane, Washington on August 5, 6, 
and 7, which I would like to invite the Committee to hold a 
field hearing with the Direct Service Tribes.
    The Portland area is commonly referred to as a CHS-
dependent area. CHS-dependent areas do not have access to IHS 
or tribally operated hospitals and must purchase all in-patient 
and specialty care services through the CHS program. This 
dependence is clearly demonstrated in the Portland area budget. 
Nationally, the CHS program is 19 percent of the IHS health 
service budget. However in the Portland area, CHS makes up 31 
percent of our overall health service budget. This dependence 
poses unique challenges for our tribes.
    One of the most critical issues affecting tribes has been 
the persistent under-funding of the CHS program. This simply 
does not make sense, given the significant health disparities 
that Indian people face and it is time Congress fully funded 
the IHS budget. My written remarks document these disparities 
and I know you are aware of these concerns.
    The Northwest Portland Area Indian Health Board takes a 
leadership role in conducting analysis and advocating for the 
IHS budget. Our estimates indicate that the CHS program has 
lost $778 million in unfunded inflation and population growth 
since 1992. The table on page eight of my written remarks 
documents this chronic under-funding. This is attributed to the 
fact that the Administration and IHS have not requested 
adequate funding and the failure of Congress to provide 
appropriations sufficient to meet the needs of medical 
inflation and population growth.
    This failure has resulted in a health care crisis in the 
CHS program. As a tribal leader, it is infuriating to know that 
other public health service programs like Medicaid and Medicare 
receive adequate increases to fund medical inflation, yet the 
CHS program provides similar services and purchases care from 
the private sector as Medicaid does, however does not get the 
same respect.
    The graph on page nine of my testimony compares growth in 
the Medicaid and CHS programs and illustrates the funding 
disparity between the two. This has resulted in a CHS system 
that rations care with a backlog of over 300,000 denied or 
deferred services. Our board has analyzed the denied and 
deferred services report and estimates that it would take at 
least $333 million to address the backlog of services. We 
performed the same analysis two years ago which yielded similar 
results for fiscal year 2006.
    Our analysis consistently indicates that an increase of at 
least $300 million is needed in the CHS program. Ideally, to 
restore the CHS program to the same level of services provided 
in fiscal year 1991, Congress would have to restore $778 
million to the CHS program. Our estimates indicate that the CHS 
budget today should be $1.3 billion per year.
    If there is one thing that Congress could do to address the 
health care crisis, it would be to direct the IHS to use real 
medical inflation and provide adequate funding to cover this 
mandatory cost. The OMB medical inflation rate used by IHS to 
develop its budget is completely inadequate. This rate has 
averaged four percent over the last 10 years, despite the fact 
that medical inflation in many of these years has exceeded 10 
percent. The CHS program is most vulnerable to the effects of 
inflation more than any other IHS budget line item.
    Within the Indian health system, there is a wide range of 
dependence on the CHS program. However, a fundamental 
distinction in the IHS system is the dichotomy between those 
areas that have hospitals and those that are CHS-dependent. 
This difference is the result of a decades-old facility 
construction process that prioritizes large user populations in 
remote areas over small populations in mixed population areas. 
The priority facility construction may have been logical at one 
time. However, over time it has created two types of systems: 
those that are hospital-based with expanded health services, 
and those that are CHS-dependent with limited ability to 
provide like services.
    In many instances, areas with hospitals can provide many 
types of services, but must be purchased from the private 
sector in CHS-dependent areas. The consequences is that CHS-
dependent areas do not receive a fair share of health service 
resources. This is demonstrated in many aspects of IHS 
programs, with the disparities in facilities construction 
funding and staffing packages. This is very true when the 
effect of staffing new facilities is factored on IHS budget 
increases. Portland tribes question why they receive less than 
1 percent increases, when Congress provided a 5 percent 
increase of the IHS budget. The answer is the phasing-in staff 
at new facilities takes between 50 percent to 60 percent of the 
budget increase.
    Another concern with the formula is the manner in which 
inflation is calculated. The formula requires that inflation be 
funded prior to allocating any remaining funds under the new 
formula requirements. If an inadequate inflation rate is used, 
it can result in a surplus of CHS funds to be allocated under 
the new formula. The new formula uses the OMB medical inflation 
rate, which I explained earlier, and is much less than true 
medical inflation. It does not account for increased health 
service costs purchased from the private sector.
    We have all heard the quote, ``don't get sick after June.'' 
In the Portland area, almost all of our tribes begin the new 
fiscal year clearing the backlog of deferred services from the 
previous fiscal year. This immediately places our health 
programs in priority-one status. This means that patients will 
not receive care under the CHS program unless life or limb 
tests apply. This process has repeated itself annually.
    For Portland-area tribes, as it is for other CHS-dependent 
areas, it is don't get sick at all or you will not receive care 
in the CHS program.
    The Chairman. Ms. Holt, I want you to summarize the 
remainder of your testimony if you would.
    Ms. Holt. Thank you.
    Finally, more needs to be done in the Indian Health Service 
toward identifying best practices for delivering care in the 
CHS program. For example, my Suquamish Tribe health program was 
established as an alternative delivery demonstration project. 
We do not have a clinic. We use our CHS money to purchase a 
health benefits program for our tribal members. We contract 
with Kitsap Physicians Health Plan in Kitsap County to 
administer the health benefits program for our tribal members.
    We have approximately 475 Suquamish tribal members enrolled 
and 45 members of other federally recognized tribes enrolled in 
this health plan. Benefits of the demonstration project include 
services parallel to those purchased in the CHS program. There 
is no prior authorization required for receiving services, and 
there have been beneficial changes to out-patient utilization 
for tribal members. Prior, they had to go to emergency rooms to 
receive care, which drove up the cost. That has come down with 
this health benefits package. We would like to see this health 
alternative project looked at by IHS and find better ways to 
utilize the CHS program.
    I would like to thank you for your time today.
    [The prepared statement of Ms. Holt follows:]

Prepared Statement of Hon. Linda Holt, Chair, Northwest Portland Indian 
                              Health Board




    The Chairman. Thank you very much, Ms. Holt.
    Finally, we will hear from Ms. Brenda Shore, the Tribal 
Health Program Director at the United South and Eastern Tribes 
in Nashville, Tennessee. You may proceed.

STATEMENT OF BRENDA E. SHORE, DIRECTOR OF TRIBAL HEALTH PROGRAM 
     SUPPORT, UNITED SOUTH AND EASTERN TRIBES, INC. (USET)

    Ms. Shore. Thank you and good morning, Mr. Chairman, 
members of the Committee, and tribal leaders. My name is Brenda 
Shore. I am an enrolled member of the Seminole Tribe of Florida 
and I am also one-half Cheyenne River Sioux from South Dakota. 
It is a pleasure to have you here, Mr. Johnson.
    My career as an advocate for the rights, health and welfare 
of Indian people spans 13 years, the last 11 of which have been 
spent as the Director of Tribal Health Program Support for the 
United South and Eastern Tribes. USET is a coalition of 25 
federally recognized tribes located in States from Maine, south 
to Florida, and west to Texas, that are served by the Nashville 
Area Office of the Indian Health Service.
    I would like to acknowledge the USET tribal leaders in the 
audience, including our President directly behind me, Mr. Brian 
Patterson, Principal Chief of the Eastern Band of Cherokee 
Indians, Mr. Michell Hicks, to my left, as well as Mr. Buford 
Rolin, Chairman of the Poarch Band of Creek Indians, again to 
my left.
    I commend the Chairman and the Committee for embarking on 
an in-depth scrutiny of the Contract Health Service Program. We 
all share the goal of raising the health status of Indian 
people ``to the highest possible level.'' You and I both know 
that we have a long, long way to go to get to that goal.
    The fundamental question is what can we do to improve the 
health status of American Indian people and finally achieve the 
goal as articulated in the Indian Health Care Improvement Act 
32 years ago. Unfortunately, there is no easy answer, but 
looking at the Contract Health Services Program is a very good 
start.
    To prepare this testimony, I consulted with my own panel of 
experts, the USET member tribes' health directors. One of them 
is sitting directly behind me, Casey Cooper, from the Eastern 
Band of Cherokee Indians. What I found was that all USET member 
tribes are heavily dependent on CHS to purchase in-patient 
care. There are only two facilities in the Nashville Area that 
offer in-patient care, and even they are very limited in what 
they can provide to their own population, let alone somebody 
presenting from another area or another tribe.
    The highest portion of CHS funding is used to purchase out-
patient care, including specialty care. Most tribes confirmed 
the widely known fact that CHS funds run out before the 12-
month period that they are expected to cover. We had nine 
tribes report that their funding is gone before nine months, 
and three of those even before seven months.
    There are dramatic differences between the per capita 
funding for CHS among our tribes. Some tribes are forced--and 
this is a quote from one of our tribes--to ``cannibalize'' 
their direct-care programs in order to purchase the outside 
care that their members need.
    Only a small percentage of the tribes' CHS funds can be 
devoted to rehabilitative services such as physical therapy. 
Tribal leaders subsidize their health care programs when health 
care funding is insufficient where they can. However, many 
tribes are not able to do this.
    I urge this Committee to be a strong and persistent 
advocate for a substantial increase to the CHS funding 
appropriation. There are three fundamental reasons for doing 
so. First, this segment of the Indian health budget is 
essential to fulfilling the United States' trust responsibility 
to provide the quantity and quality of health services needed 
to raise the health status of Indian people to the highest 
possible level.
    Second, this is the humane thing to do. Every American 
deserves access to decent and comprehensive health care. As an 
Indian and an American, it is very painful for me to see Indian 
people forced to live with untreated ailments. An example of 
this exists within my family. I have an uncle on the Cheyenne 
River Reservation who is 55 years old, but nearly immobile 
because of a knee injury suffered as a youth, a sports-related 
injury. This man lives with chronic pain day to day, but does 
not meet the priority-one level to receive a proper diagnosis 
or treatment. Our family thinks he needs a knee replacement, 
but we don't know that because he can't even get an MRI to tell 
us if that is what the case is.
    With that situation, I implore you to think of the CHS 
review committees, which every day are forced with making these 
kinds of decisions about which tribal members will be forced to 
live with pain and who will get relief. I doubt that any of you 
would want to have to make those choices, especially when they 
affect your family, friends and community members. You have the 
power to eliminate the need for these hard choices.
    Third, supplying funds for CHS is a good investment that 
benefits local economies. Mr. Chairman, I challenge you and 
anybody else in this room to dispute that fact. CHS dollars 
purchase medical services from non-Indian providers in near-
reservation communities. This spending makes valuable 
contributions to the economic health of these communities.
    In an April, 2008 Trend Watch report, the American Hospital 
Association pointed out that nationally, each hospital job 
supports almost two additional jobs and every dollar spent by a 
hospital supports more than $2 of additional business activity. 
You have a report attached to my testimony to that effect. They 
refer to this as the ``ripple effect.'' Each additional dollar 
appropriated for CHS produces benefits at several levels. It 
improves the physical and mental health of Indian 
beneficiaries. It creates local health care provider jobs, and 
through the ripple effect, it contributes to enhanced business 
activity in the community and, of course, to its tax base.
    By the same token, the local community is vulnerable to 
adverse consequences when an Indian health program is not 
funded sufficiently. An Indian beneficiary who cannot get CHS-
funded care and has no additional resources is likely to 
present to a local hospital seeking treatment as an indigent 
patient. But no hospital, especially a small community 
hospital, can absorb an unlimited number of uncompensated cases 
without damaging its economic viability. The entire community, 
Indian and non-Indian alike, suffers when a hospital fails for 
economic reasons. Ms. Krein's testimony supports this theory.
    Although IHS seeks an $8.8 million increase for CHS in 
fiscal year 2009, the resulting budget would actually enable us 
to purchase less care in every category. In my view, the 
overwhelming deficiency of the CHS program is that it is 
woefully under-funded.
    I promise I am almost done.
    I am not going to cover anything regarding the fact that 
the estimate 50 percent level of need is probably optimistic. 
Chairwoman Smith and Councilwoman Holt did an excellent job of 
that. The one thing I would like to mention, though, is 
Medicare-like rates and the way that tribes have been using 
those. As we approach the first anniversary of the 
implementation of that legislation, we will be in a better 
position to evaluate the extent to which CHS buying power has 
been increased, or if it has been increased.
    Continued vigilance regarding improving the CHS program and 
extending its reach must be continued, while assuring that IHS 
budget requests for CHS do not attempt to offset any of the 
savings we have realized from Medicare-like rates by a 
reduction in or smaller than needed requested increases to the 
CHS appropriation. We hope that this Committee will share this 
oversight responsibility with us.
    I am very grateful to have had the honor to address this 
Committee and to discuss the vital CHS program that Indian 
people depend on, but cannot count on. I thank you for the 
opportunity in my Native languages: [phrase in Native tongue].
    I hope that I am invited to testify on behalf of my people 
again in the future. I am happy to take any questions that you 
have.
    Thank you.
    [The prepared statement of Ms. Shore follows:]

   Prepared Statement of Brenda E. Shore, Director of Tribal Health 
     Program Support, United South and Eastern Tribes, Inc. (USET)




    The Chairman. Ms. Shore, thank you very much.
    All of you have provided testimony from different 
directions and different perspectives about exactly the same 
problem, and that is the lack of funding and the issue of 
priority-one requirements excluding people who live in pain.
    Ms. Shore, you described I think a relative with a knee 
problem. We have had testimony before this Committee by a 
doctor who saw a patient who had a knee problem, the kind of 
problem that represents excruciating pain--bone-on-bone, every 
day, debilitating--and went to a doctor at Indian Health 
Service and was told to wrap the knee in cabbage leaves for 
four days. Well, that is not health care.
    I don't think this represents what the Indian Health 
Service does routinely, but I say that there are a lot of 
people who live in constant pain, who are not priority one, and 
who in many cases if they show up, they don't get the kind of 
health care they need. A knee, in many cases, would be just 
completely out of reach for someone who is trying to confront 
this Indian health care system. So you have all given us a lot 
to think about.
    I have a couple of questions, but let me turn to my 
colleague, Vice Chairman Murkowski, if you have questions, and 
then my colleague, Senator Johnson.
    Senator Murkowski. I do. Thank you, Mr. Chairman.
    Thank you all for your testimony, your comments.
    I want to ask a question to the entire panel about the 
Medicare-like rates. But before I do that, I want to ask you, 
Sally, a question about just kind of the sustainability. I will 
use the Bristol Bay Area Health Corporation as an example. In 
my opening, I mentioned the fact of the transportation costs 
exceeding $2 million, and that isn't even recognizing the 
expenses that are involved there.
    Bristol Bay is looking at a situation where well over $1 
million with third-party reimbursements, including Medicare and 
Medicaid last year. How long can you sustain? How long can 
Bristol Bay sustain a situation like this, where they are faced 
with a requirement to supplement, and supplement at an enormous 
rate and amount? First of all, how long can they do this? And I 
know that that is a vague question and you are just guessing, 
but what other factors can potentially affect the ability to 
collect third-party reimbursements that we know are so critical 
here?
    So kind of a general question about the sustainability 
aspect and what other factors may be in play there.
    Ms. Smith. Thank you, Senator Murkowski. At every board 
meeting, the board sits down and wrestles with this particular 
issue. What we do is we look back into our budget and we know 
that the costs are going to be coming out of program dollars. 
How long can we take from program dollars to sustain a system 
that is so--as one board member said, Sally, this is terrible; 
you must fly to D.C. and tell them how terrible this is.
    Earlier today, we were talking about costs. You mentioned 
costs from various points in Alaska. On June 18, I received an 
e-mail, a copy of an e-mail. The e-mail says, I called PenAir 
to get some prices for our budget and was blown away. The one-
way from Dillingham where Kanakanak Hospital is, to the 
Chigniks and to Port Heiden, which is even shorter than any of 
the lines you demonstrated this morning, Senator, is by 
Cherokee, which is a single-engine, low-wing aircraft, to the 
Chigniks is $2,150.
    Senator Murkowski. From Dillingham?
    Ms. Smith. From Dillingham, by Caravan, which is a high-
wing cargo passenger plane, one-way, and you can only charter, 
is $4,953.60. Using that as the fulcrum for how long can we 
sustain, three days ago the barge landed in Aniak, Alaska. The 
price of fuel, for gas, went to $7.92 a gallon.
    Senator, you asked me, how long can we sustain this? I beg 
of the panel here that what is going to happen in Dillingham, 
what is going to happen in Indian Country across our Nation, is 
that we are going to not only be scrambling, but we are going 
to start lining up our beneficiaries, and it is going to be a 
random toss as to whom we are going to offer the services to, 
because monies are going to get so tight that every day in 
every meeting the big question on the table is: How much longer 
can we sustain the ever-increasing costs to be able to provide 
limited health care to our beneficiary population?
    It is very scary. What is also happening is we are trying 
to help ourselves, too. Earlier, we talked about the Medicare-
like rates. I know you know that the tribes are really seeking 
savings for their Contract Health Service dollars as a result 
of the implementation. So let me give you a few examples.
    At the Alaska Native Medical Center, we have roughly a $17 
million CHS budget, and the Medicare-like rates are expected to 
save ANMC approximately 20 percent to 30 percent of CHS 
dollars. So we are not being inactive. We are trying to make 
the dollars stretch. In Knik, which is down on the Kenai 
Peninsula, the emergency room costs that were $1,500 are now 
$500, using the Medicare-like regulations.
    At the Southeast Alaska Regional Health Consortium, there 
are huge savings. For example, a hospital bill of $55,000 was 
dropped to $5,000 on average. To date, SEARHC has saved 
$400,000. And one more: At the Tanana Chief's Conference in the 
interior, medevac costs of $10,000 dropped to $5,000 under the 
rates.
    Senator Murkowski. So that really is making a difference 
around the State, the Medicare-like rates?
    Ms. Smith. Yes, Senator, it is.
    Senator Murkowski. Let me ask the others on the panel if 
you are seeing the same savings? Or what problems, if any, have 
you noticed with the Medicare-like rates? Does anybody like to 
speak? Ms. Shore?
    Ms. Shore. Thank you. One of the things that we are seeing 
are very wide fluctuations already between the kind of savings 
our tribes are receiving. We realize we have tribes in 12 
different States, so they are dealing with 12 different 
hospital systems. We see anywhere from 40 percent savings down 
to 20 percent savings. What we can see so far is that there 
seems to be a lot of difference if you refer a patient to a 
teaching hospital versus just a general public hospital. That 
is something that we would like to look at further once we can 
have more data from the Medicare-like rates implementation.
    Mr. Keel. Senator, the savings that are realized from being 
able to pay at the Medicare-like rates allows tribes to extend 
some of those services to other providers. We would ask that 
those Medicare-like rates be extended to other providers to pay 
for fees and other things that are not necessarily covered 
under the normal rates.
    But yes, they have been very beneficial in allowing tribes 
to negotiate for more services. Some of the tribes in the 
Oklahoma City area, are revising some of their software in 
order to do more third-party collections. Because of the 
resulting savings, we are able to offer more services, which 
amounts to a savings in other ways. The information on tele-
medicine, those types of services that we have not been able to 
provide in past, we are able to provide because we have more 
resources.
    You know, it is a matter of looking at the resources that 
we have and making them go as far as we can, extending those to 
other providers, to getting other types of services that have 
not traditionally been available. The providers that are being 
negotiated with now, see that we are paying our bills, that we 
do pay them in a timely manner, so it is not as hard to 
negotiate a rate with them to provide services. So it has been 
very beneficial.
    Senator Murkowski. Ms. Krein?
    Ms. Krein. I can speak from the other side of the Medicare-
like rates. Coming from North Dakota, our payment is the lowest 
in the Nation, number one. So from my perspective, it is less 
payment, which adds to the unpaid bills in the emergency 
department.
    Senator Murkowski. Again, just so that I am understanding. 
Ms. Shore, you mentioned that there is a differential there, 
basically dependent on where you go for the services.
    Ms. Shore. Yes.
    Senator Murkowski. But that is different than what you are 
talking about, Ms. Krein.
    Ms. Krein. I am talking about the payment for us.
    Senator Murkowski. Right.
    Ms. Krein. Yes.
    Senator Murkowski. You mentioned, Ms. Shore, the ripple 
effect and the positive benefit that the CHS dollars generate 
throughout the communities. I think that that is an important 
factor as we talked about how we get the most bang for the 
buck, if you will, in health care dollars. When we talk about 
funding, it is not just funding to, whether it is Bristol Bay, 
but how that translates out into the communities as well, so it 
is a good point to raise.
    Thank you, Mr. Chairman.
    The Chairman. Senator Murkowski, thank you very much.
    I promised that I would have the Director of the Indian 
Health Service on, and I will do that in just a couple of 
minutes.
    Ms. Krein, how much un-reimbursed cost has your hospital 
experienced as a result of serving the Native American 
population?
    Ms. Krein. Over the years, in the last few years, it has 
been several million dollars. That doesn't count the charity 
that we do not count.
    The Chairman. And you are not turning patients away, are 
you?
    Ms. Krein. We never turn anybody away, but I can tell you 
how I have changed what we have done is before when Native 
Americans have come to our emergency department, I would know 
that they needed medication and we would give them maybe four 
or five days of antibiotics. What I have done now is give them 
enough medication until the pharmacy at Fort Totten opens, so 
that is how I have kind of reduced some of the things that we 
have done for them.
    I think the other thing that I would like to say is that 
meeting with the people from the Spirit Lake Nation, one lady 
said to me, she said, ``I do know that we use your emergency 
room in an inappropriate way, but I have to tell you that when 
I have someone who is ill and I put them in a car, the closer 
to Mercy I get, the safer I feel.''
    The Chairman. My understanding is you don't bill the 
individuals that show up for uncompensated services.
    Ms. Krein. No, we do not.
    The Chairman. Many other providers do.
    We have a system that is broken. We need to fix it. But in 
the meantime, the providing of care that you do is exemplary.
    Let me ask the witnesses, we have heard this issue, ``don't 
get sick after June''; I assume many of you see that on the 
ground, at a time when Contract Health funds have expired. I 
have spoken on the floor about a woman who was taken by 
ambulance to a hospital, suspected of having a heart attack, 
with a piece of paper taped to her thigh. As she entered the 
hospital, the hospital professional saw the paper, which was an 
admonition that if this woman was admitted, the hospital would 
likely not be able to bill and get Contract Health funds 
because they were out of funds.
    So here is a sick woman suspected of a heart attack being 
wheeled into a hospital with a piece of paper on the leg that 
says, ``take this patient at your own risk, Contract Health 
funds are out.''
    Have you all experienced that? Tell me, does anybody here 
go through the full year with sufficient Contract Health funds? 
Ms. Holt?
    Ms. Holt. No, we don't. As I testified earlier, Senator 
Dorgan, in CHS-dependent areas such as Portland, California, 
Nashville, Bemidji, we face that at the beginning of the year.
    The Chairman. At the beginning of the year, do you allow 
priority twos?
    Ms. Holt. A lot of our tribes are on priority one at the 
beginning of the year. Because they are working the deferred 
and denied services, they start the year working those cases 
and push themselves into priority one right away.
    The Chairman. Are there circumstances where cancer is not a 
priority one?
    Ms. Holt. Yes. And I think that seriously needs to be 
looked at.
    The Chairman. That is unbelievable to me. How can cancer, 
almost any kind of cancer, with perhaps the exception of the 
more common basal cell skin cancers, not be considered ``life 
or limb'' ?
    Ms. Holt. We also run into the issue of misdiagnosis in IHS 
clinics. I just lost my sister-in-law a year ago to bladder 
cancer that was diagnosed for two years as a bladder infection 
and treated as a bladder infection until it was too late.
    The Chairman. It is always a fine line when we have 
hearings and talk about these issues, a fine line to walk 
because Senator Murkowski and myself go to places and we see 
some unbelievably dedicated men and women working in the health 
area on reservations, some people that I deeply admire.
    It is also the case that we go places where we think that 
the health care is inadequate, and so we never want to have 
some sort of blanket tarnishment of the wonderful work a lot of 
people are doing out there in understaffed locations, trying 
everything they can to get by with far too little funding.
    Ms. Smith, did you want to comment on that?
    Ms. Smith. I just wanted to add two things. First, that 
using Bristol Bay as an example again, the amount that Senator 
Murkowski mentioned that we receive, 100 percent of that is 
used in transportation. The cost of medevac is so high and the 
cost of transportation is so high, all of our Contract Health 
Service dollars actually go to there.
    What happens, then, is the patient is referred to Alaska 
Native Medical Center, and the cost shift goes to Alaska Native 
Medical Center, so it goes. This is a huge issue. I am so 
thankful that we are having these hearings. I want to thank you 
very much for inviting the Direct Service Tribes. I know that 
you will hear from them as well. I urge again that we have 
these similar-type hearings across Indian Country because you 
need to hear the stories.
    Senator Murkowski, again, I have a half-dozen stories here. 
I will send those on to you. They are stories that are 
universal across Indian Country.
    The Chairman. Ms. Smith, I will be on the Turtle Mountain 
Indian Reservation next Monday or Tuesday. I guess it is 
probably next Tuesday, at a hospital there that is having very 
significant problems. I have asked the regional director, from 
Aberdeen, South Dakota, to meet us. I am going to be hearing 
from the clinic professionals directly as well.
    I have run out of time, because I promised Director McSwain 
to have him up, and he has other things as well to be attending 
to.
    I want to thank all of you. You have come from far 
distances to provide us information. It has been very good 
information. Your testimony is really very helpful to this 
Committee. So thank you very much for your testimony today.
    We will dismiss you and ask Mr. McSwain, then, to come to 
the witness table.
    Thank you very much.
    [Applause.]
    The Chairman. Director McSwain, you may come to the witness 
table. I again commend you. It is generous of you to be 
willing--and we will not do this at the next hearing--but it is 
generous of you today to be willing to listen to six witnesses 
from different parts of our Country. You are thoughtful to be 
willing to do that.
    We are interested in having your testimony today on the 
Contract Health Service issue and the things that you have 
heard. If you would like to introduce those who have 
accompanied you from the Indian Health Service, we would 
appreciate it.
    Again, your entire statement will be made a part of the 
record. You may summarize as you wish.

        STATEMENT OF HON. ROBERT G. MCSWAIN, DIRECTOR, 
  INDIAN HEALTH SERVICE, U.S. DEPARTMENT OF HEALTH AND HUMAN 
SERVICES; ACCOMPANIED BY DR. RICHARD OLSON, DIRECTOR, OFFICE OF 
 CLINICAL AND PREVENTIVE SERVICES, AND CARL HARPER, DIRECTOR, 
                           OFFICE OF 
                RESEARCH ACCESS AND PARTNERSHIPS

    Mr. McSwain. Thank you, Mr. Chairman and Vice Chairman 
Murkowski. I want to thank you both for supporting certainly my 
nomination, successful as it was, and in fact supporting it all 
the way to the floor. I was surprised at the speed at which it 
went through. So with that, thank you so much for that.
    And I also thank you for shining a light on this program. I 
certainly have been around Indian Country enough to also hear 
the same kinds of stories that you are. But let me just 
summarize my statement.
    I am Robert McSwain, the Director of Indian Health Service. 
Today, I am accompanied by Dr. Richard Olson, Director of the 
Office of Clinical and Preventive Services, and Mr. Carl 
Harper, the Director of the Office of Research Access and 
Partnerships.
    I say that because I think that these two gentlemen will 
need, as we walk away from this table, Dr. Olson actually was a 
clinician in the field, and has had to be the ordering 
physician for ordering care for Contract Health Services. So 
now he is in headquarters providing oversight on the clinical 
side of the house. And of course, Mr. Harper literally runs and 
oversees not only collections, but also the Contract Health 
Service Program for the agency.
    As you know, the Indian Health Service provides services to 
nearly 1.9 million American Indians and Alaska Natives. In 
carrying out this responsibility, we certainly have a 
relationship with all the tribal folks that you heard from 
today, plus about 555 other tribal leaders out there. I think 
that they have talked about the challenges, in a word, in the 
rural areas. We are isolated. We are remote. And certainly 
Alaska is a classic example of remoteness and access. So these 
are challenges that we have in dealing with available health 
care services that are out in the areas.
    And then we have a couple of facilities that are in heavy 
metropolitan areas, Anchorage being one, ANMC, and of course 
the medical center in Phoenix.
    I would just like to be able to share with you very 
quickly, I know that the time is late, and I will run through 
this rather quickly. But the fact is, our health system in 
total is direct in what we can provide. I think it is important 
to know as much as we can provide care means we don't have to 
buy the care. So it is a capacity. I think Senator Murkowski 
talked about vacancy rates and the fact that that is a big 
challenge for us to fill the positions so that we can in fact 
provide the care through our existing direct service system, 
both tribal and indirect. But I think it is important to point 
out that all of the services we provide are within our total 
control. We staff the facilities. We staff the programs, and we 
provide all that care.
    Now, when we have to buy care, now the control is lost. We 
have to deal with the private sector. We have to deal, and in 
order to make the $579 million go as far as we can, not only 
calendar-wise, but just in terms of services, we have 
structured a series of policies and requirements that result in 
a very highly structured program. Even though we talk about CHS 
and direct service programs being complementary, they really 
are complementary because it is the physician who needs to have 
the care provided, as when they are seeing a patient, do they 
need to order some diagnostic care.
    And I think it is important to point out that in a word, we 
provide care at nearly 700 locations, tribal and IHS. Emergency 
room and in-patient care is provided in 46 locations. A limited 
number of our largest medical facilities provide secondary 
medical care.
    So on the medical side, on the direct side, it is important 
to know that the capacity varies across the Country. You heard 
from Chairwoman Holt talking about they don't have any in-
patient care, so they are having to buy all of their in- 
patient and a great number of certainly their primary care. But 
I think that of all the hospitals we have, only 20 of the 
hospitals have operating rooms. I pause there, because we are 
going to have to go out and buy much of that care as well. And 
20 of the hospitals have operating rooms, but I think that we 
should point out also that our average daily patient load in 
some of the hospitals, we only have two facilities that have 
more than 45 patients per day. So in a word, all of our 
facilities are in fact CHS-dependent, some more than others.
    What is CHS? I think that, as I mentioned, we have a number 
of very careful strictures around how we manage the Contract 
Health Service Program. It starts with regulatory eligibility, 
a wholly different narrow eligibility for CHS. We are the payer 
of last resort. It means that we exhaust all other possible 
benefits the Indian patient has before we pay for care. We have 
something referred to as medical priorities. We have five 
priorities, and you have noted those in a chart.
    The important thing is what CHS isn't. CHS isn't an 
insurance program. Therefore, we have to manage it. We have to 
gate-keep it, and we have to make referrals in order to ensure 
that the care that is being provided is in fact authorized and 
that we have the appropriations to back up the authorization.
    The efforts that we have been going on for the last few 
years certainly, and I won't go through all of them, but we are 
maximizing resources. We are talking about the CHEF fund. That 
is the one that used to end by May and June. But with the 
additional appropriations and a combination of Medicare- like 
rights, we are seeing the actual CHEF fund go into August now, 
and we are hopeful--this is our first year--and perhaps it will 
even go further.
    With that, and the fact that we have just introduced this 
year a unified financial management system, and I am sure you 
have been hearing around Indian Country that the Indian Health 
Service is not paying its bills. We are working through that, 
and I think with the department, we will see not only good 
data--I think there was a question about data--but also 
financial management reports and our ability to pay timely.
    With that, I will conclude my summary and thank you for 
this opportunity, Mr. Chairman, and answer any questions that 
you might have.
    [The prepared statement of Mr. McSwain follows:]

 Prepared Statement of Hon. Robert G. McSwain, Director, Indian Health 
         Service, U.S. Department of Health and Human Services
    Mr. Chairman and Members of the Committee:
    Good Morning. I am Robert McSwain, Director of the Indian Health 
Service. Today I am accompanied by Dr. Richard Olson, Director of the 
Office of Clinical and Preventive Services, and Mr. Carl Harper, 
Director of the Office of Resource, Access and Partnerships. We are 
pleased to have the opportunity to testify on the Indian Health 
Service's Contract Health Services program.

    Overview of Indian Health Service Program:

    The Indian Health Service provides health services to nearly 1.9 
million American Indians and Alaska Natives (AI/ANs). In carrying out 
this responsibility, the IHS maintains a unique relationship with more 
than 560 sovereign Tribal governments located in the most remote and 
harsh environments within the United States as well as in modern 
metropolitan locations such as Anchorage and Phoenix. This geographic 
diversity and major health disparities offer extraordinary 
opportunities and challenges to managing and delivering health 
services.
    The IHS and Tribal programs provide a wide array of individual and 
public health services, including clinical, preventive, and 
environmental health services. In addition, medical care services are 
purchased from outside the IHS system through the Contract Health 
Services (CHS) program when the care is otherwise not available at IHS 
and Tribal facilities.
    The IHS is committed to its mission to raise the physical, mental, 
social, and spiritual health of all AI/ANs to the highest level.
    In FY 2008, the CHS program is funded at $579 million, and over 50% 
is administered by Tribes under Indian Self Determination contracts or 
compacts. Of the total funding the Tribal programs manage $302.9 
million and the federal programs manage $276.4 million. CHS programs 
are administered locally through 163 IHS and Tribal Operating Units 
(OU). The funds are provided to the Area Offices which in turn provide 
resource distribution, program monitoring and evaluation activities, 
and technical support to Federal and Tribal OUs (local level) and 
health care facilities providing care.
    CHS payments are made to community healthcare providers in 
situations where:

   There is a designated service area where no IHS or Tribal 
        direct care facility exists;

   The direct care facility does not provide the required 
        health care services;

   The direct care facility has more demand for services than 
        it has capacity to provide; and/or

   The patient must be taken to the nearest Emergency Services 
        facility

    Many of our patients have no health care coverage outside of that 
received from the IHS or tribal health programs. These patients often 
access needed care through local community hospital emergency rooms. 
The CHS program covers emergency services if they meet eligibility 
criteria. If the services do not meet eligibility criteria or CHS funds 
are not available, the patient is responsible for the cost of care. 
Some patients are unable to pay for these services. Although these 
patients are eligible for direct IHS care, they may not meet the CHS 
eligibility regulations and many do not have an alternate resource to 
pay for their services.
    The CHS and direct care programs are complementary; some locations 
with larger IHS eligible populations have facilities, equipment, and 
staff to provide more sophisticated medical care. IHS and Tribes 
provide medical care at nearly 700 different locations. Emergency room 
and inpatient care is provided in 46 locations, and a limited number of 
our largest medical facilities do provide secondary medical services. 
With the exception of a hospital in Alaska, IHS and Tribal hospitals 
have an average daily patient census of fewer than 45 patients. Twenty 
of the hospitals have operating rooms. In locations where there is no 
access to inpatient, emergency or specialty care in IHS or tribal 
healthcare facilities, patients are dependent on CHS for most of their 
health care needs. Those direct care programs with the most 
sophisticated capabilities have, per capita, the smallest CHS programs 
and visa versa. However, all of our facilities and programs are 
dependent on CHS for the medical services that they are unable to 
provide. The CHS program covers medical services on a priority system 
with the highest priority medical needs funded first.
    It is important to understand that the CHS program does not 
function as an insurance program with a guaranteed benefit package. 
When CHS funding is depleted, CHS payments are not authorized. The CHS 
program only covers those services provided to patients who meet CHS 
eligibility and regulatory requirements, and only when funds are 
available. Many facilities only have CHS funds available for more 
urgent and high priority cases and utilize a strict priority system to 
fund the most urgent cases first.
    In some instances AI/AN patients go directly to community 
healthcare providers for care rather than through the CHS referral 
system for required prior authorization. Because community healthcare 
providers assume that IHS provides coverage and/or payment for AI/ANs, 
it is not uncommon for community healthcare providers to expect payment 
from the IHS or tribal CHS program regardless of eligibility, 
regulatory requirements, and/or CHS medical priorities. Patients who 
access non-emergency care without prior authorization/referral are 
responsible for payment for those services, regardless of CHS 
eligibility status.
Eligibility
    In general, to be eligible for CHS, an individual must be of Indian 
descent from a federally recognized Tribe and belong to the Indian 
community served by a Contract Health Services Delivery Area (CHSDA). 
If the person moves away from their CHSDA, usually to a county 
contiguous to their home reservation, they are eligible for all direct 
care services available but are generally not eligible for CHS.
    When the individual is not eligible for CHS, the IHS cannot pay for 
the referred medical care, even when it is medically necessary, and the 
patient and provider must be informed that CHS funds are not available. 
The CHS program educates patients on the eligibility requirements for 
CHS, by interviewing them, posting the eligibility criteria in the 
patient waiting rooms, and in the local newspapers. The CHS program 
assists these patients by trying to find the needed healthcare services 
within the community at no cost or minimal cost to them. Patients who 
are not CHS eligible are responsible for their health care expenses. 
Some non-IHS providers have expectations that IHS will be the primary 
payer for all AI/AN patients, which has led to strained relationships 
with local community healthcare providers when patients are denied CHS 
which often leaves them without compensation.
Payor of Last Resort Rule
    By regulation, the Indian Health Service is the payor of last 
resort (42 C.F.R. 136.61), and therefore the CHS program must ensure 
that all alternate resources that are available and accessible such as 
Medicare, Medicaid, SCHIP, private insurance, etc. are used before CHS 
funds can be expended. IHS and Tribal facilities are also considered an 
alternate resource; therefore, CHS funds may not be expended for 
services reasonably accessible and available at IHS or tribal 
facilities.
Maximizing Alternate Resources
    The CHS program maximizes the use of alternate resources, such as 
Medicare and Medicaid which increases the program's purchasing power of 
existing dollars. The IHS works closely with CMS to provide outreach 
and education to the populations we serve to ensure that eligible 
patients are signed up for Medicare, Medicaid, and SCHIP. Recently, the 
IHS launched a nationwide awareness initiative entitled ``Resource 
Smart.'' This is an outreach program that trains staff and patients to 
maximize the enrollment of eligible AI/ANs in CMS and private insurance 
programs. By enrolling in these programs, this frees up existing funds 
to be used for CHS referrals/payments. An important component of this 
initiative is to increase the placement of State Medicaid eligibility 
workers at IHS health care facilities instead of our patients having to 
travel great distances to apply for Medicaid.
Medical Priorities
    CHS regulations permit the establishment of medical priorities to 
rank which referrals or requests for payment will be funded. Area-wide 
priorities and routine management of funds are used to try to maintain 
an equivalent level of services throughout the year and take into 
consideration the availability of services and accessibility to a 
facility within the Indian healthcare system. There are five categories 
of care within the medical priority system: ranging from Emergency 
(threat to life, limb and senses) to chronic care services.

        I. Emergency--threat to life, limb, senses e.g., auto 
        accidents, cardiac episodes

        II. Preventive Care Services e.g., diagnostic tests, lab, x-
        rays

        III. Primary and Secondary Care Services e.g., family practice 
        medicine, chronic disease management

        IV. Chronic Tertiary and Extended Care Services e.g., skilled 
        nursing care

        V. Excluded Services--unless determined to be a Medicare 
        covered service the program would pay for the services

Services not Covered by CHS:
    Payment for contract health care services may be denied for the 
following reasons:

        1) Patient does not meet CHS Eligibility requirements;

        2) Patient eligible for Alternate Resources;

        3) No Prior Approval for non-emergency services;

        4) No notification within 72 hours of emergency services or 30 
        days in some cases;

        5) Services could have been provided at an IHS or Tribal 
        facility

        6) Not within medical priority. When the services are not 
        within the medical priority levels for which funding is 
        available they must be denied.

    If the medical condition does not meet medical priorities the care 
is captured as a CHS deferred service. In the event funds become 
available the care may be provided at a later date. The IHS cannot 
incur costs which would exceed the amount of available resources.
Distribution of CHS Funding Increases
    The IHS works hard to ensure fairness in distributing CHS funding 
increases. In FY 2001 the IHS Director formed a CHS Allocation 
Workgroup that included IHS and Tribal representatives to develop a 
distribution methodology for increases in appropriations of CHS funds. 
The workgroup's focus was on distributing any potential CHS funding 
increases in an equitable manner.
    The CHS allocation methodology emphasizes four main elements:

   Inflation funding based on each Area's base at the 
        prevailing OMB inflation rate

   User Population

   Relative regional cost of purchasing services

   Access to care--those Areas with or without I/T/U facilities

Catastrophic Health Emergency Fund (CHEF)--Purpose and Intent
    The CHS program also includes a Catastrophic Health Emergency Fund 
which pays for high cost cases over $25,000, which is capped by 
Statute. Prior to FY 2008, the CHEF was funded at $18 million and 
typically was depleted before the end of the fiscal year. The CHEF is 
funded at $27 million in FY 2008. The CHEF cases are funded on a 
``first-come-first served'' basis. In FY 2007, the CHEF program 
provided funds for 738 high cost cases in amounts ranging from $26,000 
to $1,000,000.
    When CHEF cannot cover a particular high cost case, the 
responsibility for payment reverts back to the referral facility for 
payment purposes.
Unified Financial Management System
    The IHS is successfully implementing a new accounting system (UFMS) 
in accordance with Departmental policy. In the past, the CHS program 
has experienced some challenges in paying providers but we expect the 
implementation of UFMS will mitigate these issues. Making timely 
payments to community healthcare providers is a priority for us, and we 
continue to look for ways to improve the process. We provided training 
on this new system prior to implementation and continue to train our 
staff in not only this system but the overall management of the CHS 
program.
Medicare-Like Rates (MLR)
    The passage of Section 506 of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 established a requirement 
that Medicare participating hospitals accept IHS, Tribal and Urban 
Indian Health programs' reimbursement at the ``Medicare-like Rates.'' 
These rates are about 60-70% of full billed charges. The individual 
physicians and other practitioners paid under Medicare Part B are not 
included in this provision. The savings derived from the Medicare-like 
rates allow Indian healthcare programs to purchase additional health 
care services for AI/ANs, than would otherwise be the case. Since the 
regulation became effective in July of 2007, I have heard from several 
Tribes experiencing increased purchasing power due to payment savings, 
and expect the Medicare-like Rate payment savings to continue. However, 
the Federal programs have experienced less savings as most already had 
negotiated provider contracts with payment rates at, or near, the level 
of the Medicare rates, but benefit from the guarantee of reasonable 
rates that the regulation provides. Area Office CHS staffs continue 
their efforts to negotiate contracts with providers with the most cost-
effective payment rates possible.
    Mr. Chairman, this concludes my statement. Thank you for this 
opportunity to report on Contract Health Services programs serving 
American Indians and Alaska Natives. We will be happy to answer any 
questions that you may have.

    The Chairman. Dr. McSwain, thank you very much.
    I will first call on the Vice Chairman.
    Senator Murkowski. Thank you, Mr. Chairman.
    And thank you, Mr. McSwain. We, too, are glad that the 
process went quickly for your confirmation.
    So how do you respond to Sally Smith and the present-day 
reality of medivac flights not even 100 miles away costing 
$4,000 a flight? With $7.95 gas up in a village that isn't even 
that remote, really, our costs are accelerating at an 
unprecedented rate. What do we do in the short term? Do we do, 
as Mrs. Smith suggested, where you line them up and you see who 
gets care?
    Mr. McSwain. Senator, that is one of the most difficult 
questions when we talk about the fact that we may have to make 
choices. Those choices are who gets served and who does not get 
served. As I said during my confirmation, I think the question 
about why aren't we asking for more resources, we haven't made 
the best case possible. I think that out----
    Senator Murkowski. How can we make the best case? What more 
do we need?
    Mr. McSwain. We need to bring those particular stories, 
particularly the ones in Alaska and other parts of the Country. 
I am hearing more and more that it is not that the CHS budget 
is not going as far, but they are having to pay a great deal of 
transportation. It is not just in Alaska. We are transporting 
patients in the Lower 48 long distances for that priority-one 
care.
    So how do we capture that? We need to capture it and tell 
the story much better than we have. I think we have been doing 
some things such as worrying about are we staying up with 
inflation, are we doing comparisons. We should be telling a 
story that really talks about the needs in the program and 
quite frankly the growing needs that we have in purchasing 
care.
    What we are doing is buying a lot more care, and I think 
the line in the graphs that we showed earlier is indicative of 
the fact that we are buying much more care today than we did 10 
years ago.
    Senator Murkowski. Well, we want to help you be able to 
present that best case.
    I guess, Mr. Chairman, I would ask those that were present 
at the hearing, gave testimony, or those that are listening, 
let's get these stories out there because the stories are 
compelling, and the stories are very immediate. If that is what 
you need to present the case, I think you would have a roomful 
of people that are happy to provide you with the requisite 
story to give the data that you need.
    Let me ask, when I presented the question to the panel 
about how the Medicare-like rate regulations are working and 
what benefits they are seeing or what problems they are seeing, 
of course the suggestion is that it would be beneficial to 
expand these Medicare-like rates to cover other things like the 
ambulatory facilities and professional fees. What is your 
comment on that?
    Mr. McSwain. I think right now we have just elapsed a year, 
but the results are rather mixed. I think for Indian Health 
Service direct, the direct side of the house, we have been 
under scrutiny for developing good contracts, very cost-
effective contracts with providers and hospitals and other 
provider groups, for a number of years.
    So when the Medicare-like rates came out, our biggest 
concern now is whether or not the Medicare-like rates is a cap. 
On our direct side, we are experiencing whether or not if we go 
to renew those contracts, that the hospital will say, well 
then, you negotiated this rate; we would like to go at 
Medicare-like rates because it is higher. That is how well we 
have done on the direct side.
    The tribal sites obviously are experiencing some different 
results. Obviously, the Alaska results, and I have heard many 
of these stories as I have traveled around, asking the question 
of how are you doing with Medicare-like rates. Without 
exception, tribes are experiencing some good reductions 
relative to being able to spend more of their Contract Health 
Services on more people, as opposed to just straight rates.
    Now, about the expansion. I don't think we are in a 
position to talk about the expansion of the current one. We 
would like to see how it is working right now. Now, Ms. Krein 
indicated, and I have also heard a lot of stories on that side 
of it. The small hospitals out in the rural areas are seeing 
the rates, causing them some budget difficulties as well. So 
that is the other part of the story.
    So I think we will wait and see how this is working all the 
way through, and perhaps report at a future date as to how we 
are doing.
    Senator Murkowski. And then one last question for you. In 
terms of outreach, what is IHS doing in reaching out to ensure 
that Indian patients are enrolled in the alternative resources, 
whether it is Medicare or Medicaid?
    Mr. McSwain. Yes, we have actually started a program this 
year on that very issue. I want to refer to it as--in fact, let 
me ask--the Resource Smart program, it is actually in his shop. 
What we are doing is we are running a campaign that literally 
tells not only the patient, but the providers as well, that 
particularly for Indian people, that enrolling in Medicaid-
Medicare and private insurance is such that that brings more 
resources into the system, and increased collections means more 
services.
    So we have actually had an internal campaign going on and 
expanding that Resource Smart campaign. It is low cost, but I 
think actually having some results, but that is our internal 
campaign. We have shared the same campaign brochures and the 
like with our tribal programs as well.
    Senator Murkowski. Thank you.
    Thank you, Mr. Chairman.
    Thank you, Mr. McSwain.
    The Chairman. Director McSwain, you saw the chart I used at 
the start of the hearing. Obviously, we are short of the funds 
necessary for Contract Health. My first question would be, as 
you survey the landscape here, you will be making 
recommendations this year for the construction of a new budget. 
What kind of recommendations will you be making, generally 
speaking, for Contract Health Service? Do you think substantial 
additional funds are needed to fill the gap that I describe?
    Mr. McSwain. It will all certainly depend on the rules that 
come back to us as to how we actually prepare the budget. But I 
can assure you that, as we talked about, building the capacity 
on the direct side for providing direct care for both tribal 
and IHS, but the next-highest priority is Contract Health 
Service because that is the bundle of services we provide. We 
provide it or we buy it. So CHS will continue to be at least--
and I have been pushing for much higher requests and will 
continue to do so.
    The Chairman. You are pushing for a higher request? I 
understand you have to follow the rules.
    Mr. McSwain. Right.
    The Chairman. You are appointed and you work in a 
circumstance where when the rules come to you from OMB and the 
White House, you are bound to follow those rules. But it seems 
pretty self-evident to me that we are desperately short of 
funds here. So your position is that you believe more funds are 
needed and you will push for more funds?
    Mr. McSwain. That is correct.
    The Chairman. Let me ask you, the tribes and others who 
described to us that because we are so short of funds, we are 
limited in many cases to priority-one cases. And yet there are 
people with cancer who are not priority one. Describe that to 
me. Do you know the circumstances of that? It seems to me that 
in most cases, someone with cancer who needs diagnosis, 
treatment, chemotherapy, surgery, would be priority one.
    I described at the opening the situation with a young woman 
who went in for a certain kind of treatment, ended up having 
surgery, ends up with $200,000 in debt because it wasn't 
approved. They end up taking out a cancerous tumor, but it 
wasn't pre-approved.
    Describe that to me. Are there circumstances where cancer 
is not ``life and limb'' ?
    Mr. McSwain. Let me ask our good doctor here. My first 
thought is that if it is cancer, and for example I know that we 
do screenings that are priority one. I find it interesting that 
we have not declared that priority one.
    Dr. Olson?
    Dr. Olson. I don't know any of the circumstances of this 
case, but I agree with you. I don't understand why it wouldn't 
be priority one. I was the Medical Director of one of our small 
rural hospitals for 11 years, and I managed our CHS program 
directly. At our location, we did run out of funds every year.
    The Chairman. And when do you run out of funds normally?
    Dr. Olson. Usually in August.
    The Chairman. In August.
    Dr. Olson. But after that time, we could pay for absolutely 
nothing. It didn't matter whether there was priority one or 
not.
    So I don't know the circumstances of this case at all, but 
in general I agree with you, that certainly sounds like a 
priority-one case.
    The Chairman. Tell me, because you mention this, you are 
running a health facility, there is a health delivery that is 
necessary from a responsibility we have; and all of a sudden 
you have no money, and somebody shows up in a desperate 
situation.
    Dr. Olson. Well, if we can't handle the case directly, as 
Mr. McSwain was talking about, CHS and direct services are 
complementary to each other. Some of our locations are very 
small and have very few direct services, and some have a 
moderate amount of direct services. But at every location we 
have, we are CHS-dependent. As Ms. Smith talked, Alaska Native 
Medical Center has a CHS budget because there are many things 
that they can't handle there either.
    But what we do from a medical perspective is that we will 
refer the patient. We just cannot pay for it if we are out of 
funds.
    The Chairman. And then what happens is the patient shows 
up, sometimes at the medical facility. They accept the patient, 
and sometimes they may not. If they accept the patient and 
perform the medical service that was necessary, and bill the 
patient, the patient ends up having a destroyed credit rating. 
Isn't that the case?
    Dr. Olson. Yes, sir.
    The Chairman. That is devastating. The fact is, we have 
500-plus Indian tribes around this Country, and in many cases 
they are, as you said Director McSwain, in remote areas. So 
they have various forms of clinics or very small hospitals, and 
in most cases, you don't have the full range of medical 
services that can be delivered. Someone has a devastating 
ailment with a knee, excruciating pain, can't walk. Well, that 
orthopedic care is not going to come from that area. In most 
cases, that person, to the extent that they are viewed as 
priority one, will be referred.
    But I know of cases where it is not priority one that 
someone would be unable to walk, unfortunately. And that 
describes the absurdity of what we are doing here, with only 
about half the money needed being available for people who in 
many cases are very, very sick and have very serious health 
problems.
    I offered an amendment to the budget process of $1 billion 
additional funds for IHS. We are spending a lot of money on 
health care in Iraq and elsewhere. We need to fund IHS. If we 
are going to make promises, we have to keep the promises with 
the funding.
    So, Director McSwain, I hope as you put the budget together 
this year you review what is going on around the Country 
because you have a doctor here who was running a place that ran 
out of money every year. I hope you will be very vocal and very 
insistent.
    We need two things to happen: One, we need budgets to come 
from the White House that have much more aggressive funding for 
Contract Health. Number two, we need a Congress that is much 
more willing to provide funding as well. Both are necessary.
    There are a lot of other priorities. There are a lot of 
reasons for people to say, well, this or that or this is a 
priority. But I ask them to look in the eyes of people who are 
desperately sick and say to them, ``I know we made a promise, 
but we can't afford it.''
    And then look at all the other things we are spending money 
on.
    So your tenure here is going to be very important in the 
coming six or seven months as you put together your 
recommendations. I hope you will take some professional risks. 
By that, I mean that we had a person on the third floor, 
directly below us, show up at a Committee hearing one day and 
said, you know, the fact is my account is desperately under-
funded; we need more money. The next morning, he was fired 
because he was not following the President's budget 
recommendations.
    But I am asking you to take some risks as you go through 
this because we need, you need, I need, Senator Murkowski 
needs, all of us, to recognize we have a responsibility here.
    When Ms. Shore was describing circumstances in her family 
and circumstances in her tribe, I understand the emotion that 
chokes you up when you describe it because people out there are 
suffering and need to get this help.
    I have a whole series of questions that I want to send to 
you, about six or seven, dealing with SCHIP outreach and 
Medicare reimbursement rates on services. I think what I will 
do is send those to you, Director McSwain, and tell you that 
Senator Murkowski and I are waiting very anxiously for the 
House to work on the Indian Health Care Improvement Act. The 
House needs to get that done so we can get to conference with 
them and get that bill finished this year.
    We also will be continuing to put a magnifying glass over 
this issue of Contract Health because no matter what else we 
do, if we don't find a way to fix and fund contract health, 
this system doesn't work the way it is expected and promised to 
work. So we intend to do that as well.
    Do you have any final statements, Director McSwain?
    Mr. McSwain. Just that I will work. We have done this in 
the past and done it very well, and that is work with our 
tribal partners to put together the story. I really believe 
that if we tell the story clearly, my bosses and my superiors 
would agree and would support that. I think that the 
Administration would like a clear compelling story in 
particular on CHS.
    The other comment is I know it is floating around, sort of 
an elephant in the room, is this whole business of billing and 
charging Indian people. In fact, there is a piece of press out 
there on me right now that says that I said that I would 
terminate contracts with programs who were in fact billing.
    No. In fact, what we are doing is we are having a dialogue 
with them to see the extent and why are they doing it, so we 
can have a discussion about where we go next. There is no 
decision made at this point, excepting the fact by law the 
Indian Health Service cannot bill, and our position is as 
tribes take over the programs, they should do likewise, which 
is not to bill. And that is our position until the law changes. 
We will see the outcome.
    But I just wanted to clarify. I noticed that came up, and I 
fully appreciate tribes trying to make it work, trying to look 
at co-pays as an answer to addressing the health needs that 
they are trying to deal with. We will continue to work with 
them on those issues.
    The Chairman. Dr. McSwain, would you have your staff 
describe for us, if you could, and submit to our Committee the 
issue of what is determined specifically as you can to be 
priority one? Especially relating to what I just asked about 
with respect to cancer and other issues. Clearly, there is 
confusion and there ought not be.
    We ought not be confused about two things: One, how do you 
define the priorities; and number two, is there adequate 
funding? The answer to that is no, we are not confused.
    Director McSwain, thank you for being here.
    This Committee hearing is adjourned.
    [Whereupon, at 11:55 a.m., the Committee was adjourned.]

                            A P P E N D I X




                                 ______
                                 
Prepared Statement of Hon. Michael E. Marchand, Chairman, Confederated 
                   Tribes of the Colville Reservation
    On behalf of the Confederated Tribes of the Colville Reservation 
(``Colville Tribe'' or the ``Tribe''), I appreciate the opportunity to 
provide to the Senate Committee on Indian Affairs this statement on 
access to Contract Health Services (CHS) in Indian country, a topic of 
great interest to the Tribe and our citizens. The Colville Tribe 
applauds the Committee's attention to this issue and hopes that this 
hearing will illuminate some of the issues and concerns with the CHS 
program that the Tribe and other tribes face on a daily basis.
    The Tribe knows that the Committee is well aware that many Indian 
Health Service (IHS) units, including our Colville Service Unit, are in 
``priority one'' status for much of any given year. We truly appreciate 
the Chairman's and the Committee members' efforts to address these 
issues in the budget and appropriations process. Today, I would like to 
share the Colville Tribe's experiences on how shortfalls in direct care 
services, specifically, facilities and staffing, have strained tribes' 
already insufficient CHS dollars even more. I would also like to share 
some of the steps that the Colville Tribe has taken to address the 
chronic CHS funding shortfalls and to identify other CHS related issues 
our members have encountered.
Background on the Colville Tribe and IHS Services on the Colville 
        Reservation
    Although now considered a single Indian tribe, the Confederated 
Tribes of the Colville Reservation is, as the name states, a 
confederation of 12 smaller aboriginal tribes and bands from eastern 
Washington State. The Colville Reservation encompasses nearly 2,300 
square miles (1.4 million acres) and is in north-central Washington 
State. The Colville Tribe has more than 9,300 enrolled members, making 
it one of the largest Indian tribes in the Pacific Northwest. About 
half of our members live on or near the Colville Reservation.
    The Tribe's CHS program is operated by IHS from the Tribe's main 
IHS clinic in Nespelem, Washington. The Tribe's CHS delivery area 
includes Okanogan, Grant, Ferry, Chelan, Douglas, Lincoln, and Stevens 
Counties, some of which are among the largest counties in Washington 
State. Because the Tribe's Nespelem clinic is the primary source of IHS 
health care delivery, many tribal members, particularly those living in 
the Omak area, must travel long distances to receive any direct service 
health care.
Facility and Staffing Shortcomings Strain CHS Dollars
    Like many Indian tribes with large service delivery areas that are 
heavily dependent on CHS, the Colville Tribe faces a health delivery 
crisis. As the Committee is aware, a significant issue for tribal 
communities is the lack of funding for adequate health facilities in 
Indian country, both for construction and for on going staffing needs. 
The Colville Tribe is an unfortunate and all-too-familiar example of 
how funding limitations for facilities have a corresponding impact on 
CHS funding.
    The Tribe's original IHS clinic in Nespelem, Washington, was 
constructed in 1934. In the 1980s, the Tribe hoped to have constructed 
a new facility utilizing the IHS priority list system. The Tribe 
understands that at one point, its request would have been ranked 
highly on the IHS priority list but was not considered because of 
concerns that the existing facility was a historical site. That 
priority list has been closed since 1991 and some IHS Area Offices, 
including the Portland Area Office, have never had any facility 
constructed under the priority list system.
    Because the Tribe's need for a new facility was so great and the 
priority list was no longer an option, the Tribe ultimately was forced 
to utilize a variation of IHS's small ambulatory program to replace its 
aging facility in Nespelem. Of a total contract amount of nearly $4.7 
million for the Nespelem facility, the Tribe funded $3.3 million and 
IHS funded $1.3 million in equipment costs, with no additional staffing 
package. Although the new clinic is larger than the 1934 building it 
replaced and can accommodate additional patient visits, the lack of 
additional staff makes full utilization of this new facility 
impossible.
    This lack of staff and the resulting long, often futile waits by 
patients to receive treatment at the Tribe's Nespelem facility have 
created a disproportionate strain on the Colville Tribe's already 
insufficient CHS dollars by discouraging preventive care. If a patient 
cannot receive care because of facility or staffing shortages, problems 
that could have easily been addressed become emergencies and may 
ultimately lead to emergency care. Ironically, given the ``priority 
one'' rationing of CHS resources, it is only when a problem becomes an 
emergency that a patient becomes eligible for CHS services.
    Adding to this strain is the lack of inpatient IHS facilities, such 
as hospitals. Neither the Colville Tribe nor any other Indian tribe in 
the Portland Area has an inpatient hospital. This is significant 
because inpatient hospitals are able to provide services that 
outpatient clinics cannot. This gap in services is otherwise borne by a 
tribe's CHS funds.
The Colville Tribe's Efforts to Secure Supplemental Resources
    The Colville Tribe strongly believes that the United States' trust 
responsibility requires nothing less than adequate funding for Indian 
health care, including CHS. The strains on CHS funding, however, have 
required Indian tribes to do whatever they can to secure alternative 
funding or to establish other programs in their attempts to preserve 
precious CHS resources.
    IHS has adopted ``a payer of last resort rule'' that requires 
patients to exhaust all health care resources available to them before 
IHS will pay for services from the CHS program. Medicare and Medicaid 
are among the most critical alternative resources to CHS funds. The 
more CHS eligible beneficiaries that can utilize those programs, the 
farther CHS funds can be stretched. Using tribal and other funds 
contracted from IHS under P.L. 93-638, the Colville Tribe dedicates 
staff in ongoing outreach and educational efforts to ensure that 
eligible tribal members are enrolled in those programs.
    Preventive care is another area in which the Colville Tribe 
provides supplemental resources, specifically for cancer patients, an 
issue of great concern to our Tribe. Approximately 800 Colville tribal 
members are currently being treated by IHS for cancer. The Tribe has 
been fortunate to have obtained a grant during the past year from the 
State of Washington for cancer awareness and other preventive services. 
Our cancer patients include young women being treated for breast 
cancer, and the Tribe has been able to secure a grant through a private 
foundation that allows one part-time staff member to provide outreach 
and preventive care, specifically for breast cancer. These services are 
provided to supplement the shortfall in CHS funding for what would 
otherwise be preventive health care.
Other Issues Relating to Access to CHS
    In our Tribe's efforts to ensure that our tribal members have at 
least some access to health care, other issues have arisen relating to 
access to CHS. One example is the complexities in partnering with IHS 
on initiatives to relieve the burden on the CHS system. In Omak, 
Washington, which is 30 miles from the Tribe's IHS clinic in Nespelem 
and where there is no IHS facility, the Tribe went to extraordinary 
lengths to lease a tribally owned building to IHS to allow IHS to 
station a doctor from the Nespelem clinic there on a satellite basis. 
More flexibility would have made this process much easier.
    Another issue that has arisen locally is the need for more tribal 
input on the use of CHS funds. We have noted that breast cancer 
awareness has been a priority for our Tribe. CHS used to fund a 
mammogram coach that came to Colville Reservation from Spokane to 
perform on-site mammograms. Now, CHS will not pay for this service, but 
it will pay for mammogram referrals. Although some explanation may 
exist, the referrals would appear to cost much more than onsite 
mammograms.
    Thank you for the opportunity to provide this testimony and for 
your consideration of these issues. The Colville Tribe looks forward to 
continuing to work with the Committee and the respective appropriations 
committees to ensure that the CHS program serves the needs of Indian 
country and is adequately funded.
                                 ______
                                 
 Prepared Statement of Casey Cooper, Chief Executive Officer, Cherokee 
                            Indian Hospital
The Effects of Inadequate Funding for Contract Health Services in 
        Indian Health Care on the Eastern Band of Cherokee Indians and 
        North 
        Carolina
    The U.S. Congress, the General Accounting Office, and the U.S. 
Commission on Civil Rights have all concluded that American Indian and 
Alaska Native communities suffer from significant health disparities 
and inadequate federal funding of Indian health care. 
\1\-\4\ Current federal funding levels for Indian health 
represents approximately 60 percent of the level of need in Indian 
country and is significantly less, per capita, than other federally 
funded populations, including federal employees, immigrants, and 
prisoners. \5\
---------------------------------------------------------------------------
    \1\ United States Government Accountability Office, Report to 
Committee on Indian Affairs, U.S. Senate, Indian Health Services: 
Health care services are not always available to Native Americans, 
August 2005.
    \2\ Sally Smith 2007 Testimony, http://www.nihb.org/
article.php?story=20070216120829197 (1 of 5) [7/31/2007 5:02:10 PM].
    \3\ U.S. Commission on Civil Rights, A Quiet Crisis: Federal 
funding and unmet needs in Indian country, July 2003.
    \4\ U.S. Commission on Civil Rights, Broken Promises: Evaluating 
the Native American health care system, September 2004.
    \5\ I.H.S. Appropriations Per Capita Compared to other Federal 
Health Expenditure Benchmarks, March 2003.
    \6\ HHS, Indian Health Service ``Justification and Estimates'' 
2005.
---------------------------------------------------------------------------
Contract Health Service Funding
    Funding for Contract Health Services (CHS), a line item in the 
Indian Health Service budget that allows Indian health providers to 
purchase health care services when they cannot directly do so, is 
grossly insufficient. The annual need for CHS has been estimated to be 
in excess of $1 billion per year, and is currently funded at 
approximately half that amount. \6\ As a result, most tribes, including 
the Eastern Band, are forced to ration health care to Indians, funding 
only those services for conditions that pose an immediate threat to 
life or life function. \1\
    As medical inflation continues to outpace routine inflation and 
chronic disease rates continue to increase, insufficient funding will 
accelerate the disparities in the health of American Indians and Alaska 
Natives. For example, without adequate funds it is certain that there 
will be missed opportunity to diagnose, treat, and in some cases cure 
pre-malignant or early malignant lesions of the skin and colon. 
Malignancies of the prostate, or ovaries, uterus, or breast will go 
undiscovered in numerous patients without specialty consultation in 
urology and gynecology respectively. Blindness will result from 
unidentified retinal disease hidden behind cataracts that are not 
removed in a timely manner. Early cardiac or other vascular 
intervention will not be possible without indicated cardiac stress 
testing and other vascular testing. Without proper intervention, 
critical vascular lesions will almost certainly continue their 
inevitable progression to infarction of the heart (heart-attack) or 
brain (stroke). Unfortunately, these needs have already outpaced even 
these supplemental funds provided by tribes.
    Rationing of health care has immediate and secondary consequences. 
Untreated conditions result in progressive deterioration of health, and 
delayed intervention leads to a worsening prognosis for recovery and 
more expensive treatment. Patients will be subjected to avoidable pain 
and suffering, and delays in treatment will likely increase rates of 
depression and stress resulting in higher rates of chronic disease and 
suicide.
Regional Economic Impact
    To the extent that resources are available, tribal Contract Health 
Service programs are a significant referral channel for non-tribal 
health systems. In 2008, the Indian Health Service and tribal health 
programs will refer $579 million of federal Contract Health Services 
dollars into the public and private sectors. \7\ This does not include 
referrals from Indians with alternate funding sources, such as private 
health insurance, Medicare, and Medicaid. The Eastern Band alone will 
refer over $15 million of care to North Carolina health care providers, 
with $3.5 million of these referrals from Contract Health Service 
dollars. The American Hospital Association has estimated the economic 
ripple effect of health care to be approximately two dollars for every 
dollar spent and every hospital job represents approximately two 
additional jobs. \8\ Tribal health systems also provide a safety net 
for beneficiaries who have no health insurance coverage. The failure of 
tribal CHS programs will compromise this safety net, exacerbating the 
economic challenges of uncompensated care for non-tribal health systems 
in neighboring health care markets.
---------------------------------------------------------------------------
    \7\ See 2008 I.H.S budget.
    \8\ American Hospital Association, ``Trendwatch'' April 2008.
---------------------------------------------------------------------------
    In North Carolina, the Eastern Band is forced to cannibalize direct 
care services and other programs like economic development, housing, 
and infrastructure, to mitigate the adverse health and economic effects 
of inadequate CHS funding. CHS funding represents approximately \1/4\ 
of the annual emergent and urgent needs. Thus, continuing to fund this 
unmet need will erode access to primary care, and undermine economic 
and community development.
Innovative Solutions
    The appropriation of more federal dollars for Contract Health 
Services is the only real solution to the serious health disparities in 
Indian country. Until Congress fulfills its treaty and trust 
obligations to Indians and tribes, the Eastern Band and other tribes 
have sought to innovate through aggressive tribal programs to get 
Indians better health care opportunities.
    For example, the Eastern Band aggressively encourages its tribal 
members to enroll in alternate health services they are eligible for 
and assists with the costs of those alternate programs. After visiting 
the Mille Lacs Band of Ojibwe Reservation, the Eastern Band established 
a Supplemental Health Insurance Program (SHIP) that funds Medicare Part 
B premiums. So if a tribal member is eligible for Part B, which covers 
physician and other non-hospital services, the Tribe reimburses the 
Indian beneficiary for the cost of enrolling in the program. While the 
cost of the tribal program to reach Indian beneficiaries costs 
approximately $1 million per year, the savings to the Tribe and the 
Indian Health Service is significant. The Tribe can then bill Medicare 
for service provided at the Cherokee Indian Hospital and only pays for 
co-payments rather than the full cost of specialty care.
    To ensure that the Tribe reaches the maximum number of tribal 
members that it can, it has combined several sources of tribal data--
enrollment, per capita distribution, and hospital information--to 
create a database for outreach to community members. When an Eastern 
Band member is about to become eligible for Part B, the database alerts 
the Tribe so it can specifically reach out to the individual. This also 
allows decreases the cost of enrolling in Part B, which increases as 
the age of the eligible recipient increases.
    As a part of the targeted outreach, Eastern Band hospital staff 
communicate with tribal members by letter, visits to the Senior Center 
(called Tsali Manor), and various community meetings to assist tribal 
members with enrollment in Part B.
Conclusion
    The Congress should adequately fund Contract Health Services in 
accordance with the treaty and trust responsibilities of the United 
States to Indians and tribes. Not doing so compromises Indians' quality 
of life, results in avoidable suffering, promotes inefficiency, and 
perpetuates the economic challenges of both tribal and non-tribal 
communities.
                                 ______
                                 
Prepared Statement of Tracie Revis, Second Year Law Student, University 
                               of Kansas
    Mr. Chairman and distinguished members of the committee, my name is 
Tracie Revis. I am Yuchi and Muscogee Creek from Tulsa, Oklahoma. I am 
a second year law student at the University of Kansas and recent cancer 
survivor. My entire life, starting from my birth I have received 
services from Indian Health Services (IHS). I am all too familiar with 
the process of IHS, and contract health services (CHS) and how long it 
takes to get services, if you are fortunate to receive them at all. I 
am excited to submit testimony on this matter of IHS-Contract Health 
Services. I am excited because I believe that stories like mine need to 
go on record so that perhaps something in the future will change. IHS 
has been a double edged sword for me. It has been the system that hurt 
me the most, but yet saved me at other times.
Diagnosis
    In 2005, I graduated with my Masters degree from the University of 
Oklahoma and began law school at the University of Kansas. During my 
first semester of law school I became very fatigued and my lymph nodes 
became painful. I was losing weight, became very pale, and was 
experiencing night sweats. I went to the Haskell Indian Nations Indian 
Health Services clinic in Lawrence, Kansas where the doctor ordered a 
chest x-ray and diagnosed me with walking pneumonia. He prescribed 
antibiotics but my symptoms persisted. For three weeks the doctor 
repeated x-rays and treated my illness as walking pneumonia. There was 
some discussion about ordering a CT scan, however, because Oklahoma was 
my home area and I was in Kansas, we had difficulty getting 
authorization for a referral to the local Lawrence facility.
    Finally, in November, a year after I started going to the doctor 
for my symptoms, I had become too ill and the doctor at Haskell ordered 
the CT Scan at Claremore Indian Hospital in Oklahoma. The doctor at 
Claremore did a full workup and CT Scan. He immediately reviewed the CT 
films and informed me that I had a large mass above my heart area and 
that I would need to have a biopsy immediately. His inclination was 
that I either had a form of cancer or a thymoma. He wanted me to meet 
with a thoracic surgeon to discuss the possibilities and have him 
review my films.
The Referral
    My referral ``for evaluation'' with the thoracic surgeon ``and a 
biopsy if necessary and any additional treatment if necessary'' were 
sent to my tribal contract health department. However, I ran into 
several complications and was deferred, denied and then mysteriously 
approved. The process was unclear and confusing, and I was not 
contacted by CHS if there was missing documentation. I had to 
constantly call my tribe's area clinic and the main tribal complex 
contract health services office to get information on my referral 
status. Upon receiving the approval for the biopsy I had to call and 
schedule the appointments myself and then coordinate with the local 
clinic's caseworker. The surgeon's office informed me that until I 
could confirm payment that they could not discuss the possible dates 
for surgery with me. In December, a month after the mass was 
discovered, I went in for the biopsy.
    The thoracic surgeon decided to biopsy a tissue sample from the 
mass instead of biopsying the lymph nodes. I was informed that that 
there would be a small incision below my collar bone to take the tissue 
sample but, if the thoracic surgeon could determine with certainty that 
the mass was a thymoma then he would perform a sternotomy and remove 
the mass. After the biopsy began the thoracic surgeon could not get a 
good tissue sample and consequently performed the sternotomy which 
ultimately removed 75% of the tumor. I was in the hospital for six days 
following the procedure. I became completely dependent on others to 
assist me.
    On Christmas day, I was given the official diagnosis of Hodgkins 
Lymphoma. At that time there was one tumor and it was at an early stage 
2 (since it was only in the chest area and not below the diaphragm).
Getting Treatment
    In January 2006, I was told that there were some concerns about my 
referral originating from Haskell Health (because it was in Kansas) and 
concern because I did not have a utility bill in my name within my 
tribal boundaries. Because of these concerns, my tribal CHS requested a 
verification of my residence. Again, I explained that I was a student 
when I was diagnosed and that upon moving back to Oklahoma I had to 
move back to my grandmother's residence and therefore all of the bills 
were in her name. During the address verification period in February, I 
developed a bad cough and went to Claremore IHS to see the doctor that 
had performed the CT scan. He ordered another chest x-ray which showed 
that the mass appeared to have doubled in size since pre-surgery. He 
inquired about my progress with getting an oncology appointment and I 
explained to him what I had been told by my tribal CHS that my referral 
was approved pending residence verification.
    My doctor was very concerned and decided to call the main tribal 
CHS to find out when I would be able to schedule an appointment. He 
spoke with my caseworker at the tribe, who informed him that my 
referral had been denied. He inquired about the appeal process and 
asked if I had been notified of the denial. The caseworker responded 
that I had not been informed and that I would not be informed for at 
least 4 weeks, then I would receive a letter in the mail telling me 
that I had been denied. Also, that if he (as my referring physician) 
wanted to send another referral he would have to wait 4 weeks and then 
we could appeal with a new referral. He asked about why I had been told 
that it was ``approved pending verification'' and had the CHS office 
received Haskell's letter stating that my address on file was listed as 
Oklahoma. She said that it was denied because they did not have any 
money and then she read him the policy of denying a referral and policy 
about waiting 4 weeks before notifying the patient. I was in the room 
for the entire call which was on speakerphone.
    Advocating for the urgency of treatment, my doctor inquired whether 
the CHS caseworker understood how important it was that I see an 
oncologist right away. She said she could not do anything and that I 
needed to speak with the local caseworker at my tribal clinic. My 
doctor was very upset and decided to call the tribal CHS director, 
unfortunately she was unreachable that day. My doctor advised me that 
my health could not wait, and that I needed immediate treatment. He 
decided to call other caner facilities within the state to see if they 
were willing to take me as an uninsured patient. Every hospital that he 
called said they were at their fill of uninsured patients and that they 
could not take me on financially. At that point my doctor suggested 
possibly seeking treatment out of state.
    After the denial from IHS, I called the State Department of Health 
Services inquiring about state assistance and was told that I had the 
``wrong type of cancer''. I did not qualify for any assistance because 
I did not have children and was not disabled. It did not matter that I 
did not have an income. Frustrated by the system, I called state 
representatives, tribal officials, and anyone who knew someone that 
might be able to offer suggestions. I followed up with the CHS Director 
and was informed that I was ``approved pending verification of my 
residency''.
    Three months after my biopsy, I finally had approval for treatment 
and had an appointment with an oncologist. My new oncologist reviewed 
all of the previous medical records and ordered more tests to determine 
the final staging of my tumor size before I began treatment. Upon 
initial review he presumed my staging was stage 2 because of the 
location of the tumor above the diaphragm. However, because of the time 
it took for me to get approval to begin treatment, the tumor had grown 
and I now had 3 tumors in my chest and neck. Also, I had enlarged lymph 
nodes in the groin and in areas surrounding the aorta and an enlarged 
spleen and liver. My final staging was a 3(B)(E).
    I tolerated the treatment well. However, because of my anemia and 
weight loss my oncologist recommended red and white blood cell 
boosters. Unfortunately, the cost of the injections was $4,000 for one 
and $6,000 for the other. My oncologist knew that CHS would not and 
could not afford that amount so he put me in a clinical trial. Earlier 
this year, the FDA released a report on one of the drugs that noted 
that it should not be given to young patients with chest, neck, or 
breast cancer; it should not be given to patients that have a high 
chance of recovery, or to young patients. I met all three criteria.
Remission
    Through it all, I overcame the obstacles and struggles and finished 
treatment in July 2006. In September, I accepted a full time job 
working in cancer research at a University Health Center Institutional 
Review Board away from my tribal community but within an IHS urban 
service area. While filling out my insurance forms, I inquired about 
pre-existing conditions. The insurance provider said that if I could 
verify continued coverage with no lapses in service then they would 
cover the pre-existing condition. I explained that I was always 
eligible for direct service through IHS. They accepted it and I had 
insurance coverage.
Relapse
    In November 2006, I began to show symptoms that my cancer had 
returned. Because of the problems that I experienced at the former 
cancer center I decided to change oncologists. I spoke with the IHS 
service area office's CHS and they agreed to be the secondary provider 
to what my insurance company did not cover even though my new doctor 
was not a doctor they contracted with. The plan of treatment was for 
extensive salvage chemotherapy and an autologous stem cell transplant. 
My transplant would consist of 30 days in the hospital and more high-
dose chemotherapy.
    I began salvage chemotherapy in January 2007. The treatments were 
much more intense and longer. It took two different types of salvage 
chemotherapy treatments which was four total rounds to get my tumor to 
respond. By May, my tumor had decreased enough to begin transplant 
procedures.
Transplant
    I had been speaking with CHS and my insurance company to try to 
coordinate what services would be covered. CHS advised me that they 
would try to cover the costs that the insurance provider would not. The 
dilemma came when the insurance provider said that my hospital, where I 
was working and where I was planning to have the transplant procedure, 
was not in the insurance provider's network and that I would have to go 
out of state. CHS said that in order for me to have a chance of their 
office covering the remaining costs then I would need to stay in-state 
(even though it was a higher cost). The CHS worker informed me that I 
had a high chance of having my costs covered because I was a good 
candidate. She [CHS caseworker] said that it is not common to cover 
most transplants because of the follow-up costs that are associated 
with them and that often patients do not adhere to the follow-up 
treatment. Ultimately, after I had already scheduled the transplant and 
began the transplant procedures (stem cell harvesting, heart and lung 
tests) my referral was denied and my health could not afford the wait 
to reschedule at another facility out of state.
    I was released from the hospital in June 2007 and had plans to 
return to Lawrence to restart law school. In July, my doctor called to 
say that the transplant did not remove all of the cancer cells, and I 
was still showing active uptake in my cells. I was immediately sent to 
a radiation oncologist.
Radiation
    I had plans to return to law school in the Fall of 2007 and because 
of my current obstacles with IHS and CHS I decided to not let ``the 
wait'' for referrals and approvals be the deciding factor. This 
``wait'' for referrals may or may not produce services, and I felt that 
my health could not afford that gamble of getting an approval. I 
started school and radiation at the same time. As a result of my 
previous struggles, I chose to not go through IHS. The debt is 100% on 
me. However, I maintained contact with my area office regarding my 
decision to go back to school and my doctor is in Oklahoma.
    Currently, I am in remission for a second time. I have outstanding 
medical debt as well as my credit rating has been greatly impacted. I 
receive CT and PET scans every six weeks to monitor any growth in the 
tumor, and full blood panel tests. CHS has covered two of my five scans 
since radiation. My biopsy bill has been paid, even though after the 
procedure, CHS claimed that they had not authorized the hospital stay. 
It took over a year to get it paid, but it has now been paid. While, 
IHS covered my chemotherapy, I still incurred several other costs 
associated with cancer. My total cancer debt is around 200,000.
Other problems
    Getting the referrals and approvals was not the only problem that I 
encountered with IHS and the CHS system. When I was deferred and then 
denied the first time, I asked what the process was so that I may 
appeal it. I was told that I was not allowed to see the policy for 
approvals or denials. There was not one person who could tell me how 
the process worked, or how often the committee met, or explain the 
criteria for approvals.
    At the cancer center where I was referred the financial manager 
informed me of her issues of dealing with me because I was from ``the 
Indian Clinic''. I corrected her and told her that I was not referred 
from a clinic but from a Hospital and it was actually my tribe, not the 
hospital that was the payor. She proceeded to tell me how ``the Indian 
clinic likes for us to treat their patients, but they don't want to pay 
us.'' I was frustrated by her attitude, dislike for IHS, and blatant 
racism; however, it was not my issue to deal with. I was a patient like 
every other patient, battling cancer and fighting for my life. I was 
very concerned that perhaps I would be treated differently and would 
not receive the highest standard of care because I was an ``Indian 
patient''. Each time that I went in for treatment the front desk would 
ask me for my ``Indian authorization'' or my ``Indian papers'' before 
they could treat me. They did this very loudly, and I often felt 
embarrassed by the scene that they caused.
    During treatment I often needed to get CT scans to monitor the size 
of my tumors. I would go to Claremore IHS to get the scans and often 
during the scans the CT machine would overheat and would have to be 
shut down for a while to let it cool it off. It has been suggested by 
other doctors that I may not have had adequate scans because the 
machine at Claremore IHS was older and probably did not show the true 
picture of my cancer. Therefore, it is likely that I may have never 
truly been in remission.
Purpose of my Testimony
    Through all of the struggles, I understood that I was fortunate to 
have access to what health care I did receive. Having worked on IHS 
contracts in prior jobs, I understood the budget process and that there 
is never going to be enough money to meet the entire medical need of 
the community. But, I truly believe that had someone been more willing 
to walk me through the process in the beginning I may have had a 
different experience. I, like so many others was very disillusioned by 
the true nature of the system. Never throughout my entire experience 
did I feel empowered or in control of my own health. If I would have 
had a choice on what my options were in the beginning I may not have 
had to suffer so much. Since then, I have been told by several doctors, 
oncologists, and surgeons that I should have never had my chest cracked 
open in the first place. I did not have a choice and since then my 
struggles with the system lead to longer treatment time for a tumor 
that was even larger than was originally noticed. I will forever bear 
the scar and at 30 years old I have already been through menopause as a 
result of my treatment. I am happy to be alive and have the opportunity 
to share my story, but, I cannot help but to wonder what would be 
different if I had only known.
    Thank you
                                 ______



                                 
                                  
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