Supreme Court hears dispute over whether ISDA requires IHS to reimburse tribes for contract‑support costs tied to third‑party revenue

The Supreme Court heard argument in Becerra v. Upachi Tribe, case number 23250, over whether the Indian Self‑Determination Act (ISDA) requires the Indian Health Service (IHS) to reimburse tribes for contract‑support costs (CSCs) associated with program income tribes receive from third‑party payers such as Medicare and Medicaid.

Government counsel told the Court that ISDA’s basic design requires IHS to transfer appropriated funds to tribes for the federal programs the tribes agree to run and to pay contract‑support costs to cover gaps left by the secretarial amount. But the government said the statute and implementing provisions do not allow CSCs to be calculated by deducting or otherwise accounting for third‑party revenues that tribes collect and spend independently. “That theory would upend how the statute has been administered for 35 years,” the government argued, and would conflict with a statutory prohibition, the government said, that IHS may not pay costs that are not directly attributable to the ISDA contract.

Tribal counsel responded that when a tribe collects and spends program income while carrying out the contract’s services, it is acting pursuant to the contract and incurs administrative and indirect costs that ISDA makes recoverable. “The self determination act entitles the tribes to recover the disputed contract support costs in this case,” counsel for the tribes said, arguing that subsection (a)(3) was enacted to clarify that enumerated categories of costs are allowable and that tribes should be put “in the same shoes” as IHS for such costs.

Justices pressed both sides on multiple fronts. Several asked whether costs of collecting third‑party payments are covered by the secretarial amount while subsequent decisions about how to spend those funds are outside that bucket; others asked whether limiting CSCs to services specifically enumerated in each contract would prevent alleged abuses. The bench also debated whether ISDA’s instruction to construe provisions “liberally for the benefit of the Indian tribe” narrows statutory ambiguity in the tribes’ favor, and whether the Affordable Care Act’s payer‑of‑last‑resort rule and post‑2012 cases changed the practical incentives that produced these disputes.

Budget consequences featured prominently. The government said adopting the tribes’ approach could materially increase annual CSC obligations and cited a range it had discussed internally of roughly $800 million to $2 billion per year, warning that CSCs are funded from discretionary appropriations and large increases could force cuts elsewhere in IHS’s budget. Tribal counsel and other tribal‑supporting briefs countered that the government’s estimates were speculative and not grounded in the record, and that many tribes’ claims are far smaller (one tribe’s damages sought in the cases at issue were described in argument as in the low millions for particular years).

Counsel for a tribe with a strained emergency‑medical‑services (EMS) contract told the Court that program‑specific model contract language requires tribes to maintain billing systems and treat program income as part of the contract‑administered program; that counsel said program income has long been treated in sample contract language and that overhead tied to administering those programs is the type of cost ISDA was designed to make recoverable.

Both sides acknowledged practical tensions. The government emphasized statutory limits and the prohibition against reimbursing costs not directly attributable to ISDA contracts; the tribes emphasized Congress’s 1994 amendments and model contract language they say incorporate program income into the contract and support recovery of overhead tied to administering the contracted program. The argument concluded with rebuttal from government counsel asking the Court to reverse the lower‑court rulings, and the case was submitted.

The Court’s decision will determine whether and how third‑party program income affects IHS’s contract‑support cost obligations under ISDA and could have wider budgetary effects for IHS and tribes that contract to operate health programs.