Swinomish Indian Tribal Commu v. Xavier Becerra ( 2021 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 1, 2020 Decided April 13, 2021
No. 19-5299
SWINOMISH INDIAN TRIBAL COMMUNITY,
APPELLANT
v.
XAVIER BECERRA, IN HIS OFFICIAL CAPACITY AS SECRETARY,
U.S. DEPARTMENT OF HEALTH & HUMAN SERVICES, ET AL.,
APPELLEES
Appeal from the United States District Court
for the District of Columbia
(No. 1:18-cv-01156)
Paul E. Frye argued the cause for appellant. With him on
the briefs were Rachel A. Sage, Stephen T. LeCuyer, Steven D.
Gordon, and Philip Baker-Shenk.
Lloyd B. Miller, Donald J. Simon, Rebecca A. Patterson,
and Whitney A. Leonard were on the brief for amici curiae 19
Native American Tribes and Tribal Organizations and the
National Congress of American Indians in support of appellant.
John S. Koppel, Attorney, U.S. Department of Justice,
argued the cause for appellees. With him on the brief was
Daniel Tenny, Attorney.
2
Before: KATSAS, RAO and WALKER, Circuit Judges.
Opinion for the Court filed by Circuit Judge WALKER.
WALKER, Circuit Judge: Indian Health Service agreed to
pay the Swinomish Indian Tribal Community to run a health
program on the Swinomish Reservation. In this case,
Swinomish says Indian Health Service shortchanged it.
The district court disagreed. So do we.
I.
A.
For much of the history of American Indian reservations,
the Bureau of Indian Affairs ran most aspects of tribal
government. The federal government controlled tribes’ health
care, education, and policing. The result was that decisions
crucial to the lives of American Indians were made by
politicians and bureaucrats far removed from tribal
communities. This was not, to put it mildly, ideal. See H.R.
Rep. No. 93-1600, at 19 (1974) (“The growth of the
administrative power of the Bureau of Indian Affairs . . . on
Indian reservations had effectively destroyed existing tribal
forms of government.”).
So Congress passed the Indian Self-Determination and
Education Assistance Act, Pub. L. No. 93-638, 88 Stat. 2203(1975) (codified as amended at 25 U.S.C. § 5301 et seq.), to
provide federal funds directly to tribes that “assume
responsibility for aid programs that benefit their members.”
Menominee Indian Tribe of Wisconsin v. United States, 136 S.
Ct. 750, 753 (2016). With regard to health care, tribes in effect
3
become federal contractors running health programs
previously administered by Indian Health Service. They then
negotiate contracts with Indian Health Service.
There are, however, limits to the negotiation. No matter
what, the government must pay the tribe at least what Indian
Health Service would otherwise have spent to run the same
program. 25 U.S.C. § 5325(a)(1). This payment is called the
secretarial amount. See, e.g., Salazar v. Ramah Navajo
Chapter, 567 U.S. 182, 186 (2012).
Since federal contracts come with expensive compliance
costs, Congress amended the Act in 1988 to cover those costs.
Pub. L. No. 100-472, § 205, 102 Stat. 2285, 2292-94 (1988)
(codified at 25 U.S.C. § 5325). Indian Health Service must
now also pay “contract support costs” not included in the
secretarial amount:
There shall be added to the amount required by
paragraph (1) contract support costs which shall
consist of an amount for the reasonable costs for
activities which must be carried on by a tribal
organization as a contractor to ensure compliance
with the terms of the contract and prudent
management, but which —
(A) normally are not carried on by the respective
Secretary in his direct operation of the program;
or
(B) are provided by the Secretary in support of
the contracted program from resources other than
those under contract.
Id. § 5325(a)(2).
4
Contract support costs cover indirect administrative
expenses like audits and computer systems, as well as direct
expenses like workers’ compensation and unemployment
taxes. Often, the indirect expenses billed to Indian Health
Service are a percentage of the total direct costs.
Indian Health Service pays the secretarial amount and
contract support costs so that tribes will not have to use their
own money to run and support the program. As a result, tribes
typically don’t bill patients for their medical services. But that
doesn’t mean tribes can’t earn money elsewhere. Like private
hospitals and doctors’ offices, they can bill patients’ insurance
companies, including Medicare and Medicaid. 25 U.S.C.
§ 1641(d)(1).1
The Indian Self-Determination and Education Assistance
Act is not silent as to this insurance money. It requires tribes
to use the insurance money on their health programs. But the
Act also requires Indian Health Service to fully fund the tribe’s
program without regard to any insurance money it receives. Id.§§ 5325(m), 5388(j).
In other words, if Indian Health Service would have spent
$3 million on a tribe’s health care back when it provided the
health care directly, it must now pay that contracting tribe at
least $3 million — period. This is true even if the tribe earns
$1 million in insurance revenue. Indian Health Service can’t
pay the tribe $2 million on the theory that its revenue will make
1
Tribes can earn income from a variety of sources. In this case,
Swinomish says it earned $636,421 from “third-party billings” and
received $27,730 as “additional revenue.” Appellant’s Br. at 17.
Because insurance money makes up the vast majority of
Swinomish’s income, we refer to all third-party revenue as
“insurance money.”
5
up the difference. Instead, the tribe gets to use its $1 million
earnings however it wants — as long as it is spent on the
program.
But recall that Indian Health Service must also pay
contract support costs. Taking the above example, all parties
would agree that Indian Health Service owes contract support
costs on the $3 million secretarial amount. But what about the
additional $1 million the hypothetical tribe receives from
insurers and spends on health services? The question in this
case is whether Indian Health Service must pay contract
support costs on that additional money.
B.
For the past twenty-four years, the Swinomish Indian
Tribal Community has directly delivered health care to its
members using funds negotiated through a contract with Indian
Health Service. As required by statute, supra pp. 2-5, these
negotiated funds include the secretarial amount and contract
support costs. Swinomish uses the funds to run a medical clinic
and provide dental services, substance abuse counseling, and
other health services.
Those are not the only funds Swinomish spends on its
medical services. It bills its patients’ health insurance
providers and spends this revenue on its health services. And
the Tribe can tap into its general treasury.2
2
Cf. Appellant’s Br. at 17 (“Thus, even if [Indian Health Service]
had paid the Tribe’s 2010 [contract support costs] claim in its entirety
(i.e., for $245,867), the Tribe would still be short $242,885 in
operating the Federal program.”) (emphasis omitted).
6
In 2010, Indian Health Service paid Swinomish a total of
$3,028,213 to run the health program. But Swinomish claims
it is owed an additional $245,867 in direct and indirect contract
support costs calculated as percentages of the money it
received from insurers and spent on health services. See
Appellant’s Br. at 15-16. It therefore sued under the Contract
Disputes Act and Declaratory Judgment Act. 41 U.S.C. § 7101et seq.; 28 U.S.C. § 2201; see also 25 U.S.C. § 5331(a).
The district court granted the government’s motion for
summary judgment. Swinomish Indian Tribal Community v.
Azar, 406 F. Supp. 3d 18, 32 (D.D.C. 2019).
The Tribe appealed.
II.
The Indian Self-Determination and Education Assistance
Act does not require Indian Health Service to pay for contract
support costs on insurance money received by Swinomish.
Neither does Swinomish’s contract with Indian Health
Service.3
A.
The Indian Self-Determination and Education Assistance
Act requires the government to pay for some contract support
costs. But for two reasons, the Act’s text and structure do not
require payment of contract support costs when a tribe spends
money received from sources other than Indian Health Service,
like insurance providers.
3
We have jurisdiction under 28 U.S.C. § 1291. And we review the
district court’s decision de novo. Stoe v. Barr, 960 F.3d 627, 629
(D.C. Cir. 2020).
7
First, when the Act speaks of contract support costs, it does
not mention money received from third parties, like insurance
providers. Instead, the Act says reimbursements for contract
support costs cover activities that “ensure compliance with the
terms of the contract” conducted by the tribe “as a contractor.”
25 U.S.C. § 5325(a)(2) (emphasis added).
The scope of contract support costs is thus limited to those
under one “contract” — the one between a “contractor” (the
tribe) and the contracting agency (Indian Health Service). In
that contract, a tribe promises to provide certain services to its
community. In exchange, the government promises to provide
the tribe with a certain amount of money — the secretarial
amount — for those services. Then, on top of that, the Act
requires additional government funding to cover a tribe’s cost
of complying with the terms of that contract.
To be sure, other contracts affect the tribe’s budget. A
patient might have a contract with a private insurer. Another
patient may have Medicare or Medicaid. In those instances,
billing patients’ insurers may lead to more money for the tribe.
But the Act doesn’t require the government to pay for contract
support costs on money generated from those other contracts
— just for money paid by Indian Health Service for “the
contract.”
The Act repeatedly reinforces this limited scope for the
contract support costs it requires. For example, it guarantees
reimbursement for contract support costs incurred while
operating “the Federal program that is the subject of the
contract” or “the Federal program, function, service, or activity
pursuant to the contract.” Id. § 5325(a)(3)(A)(i)-(ii) (emphases
added).
8
Second, just as the Act speaks of contract support costs
without any mention of insurance money, it elsewhere speaks
of insurance money without any mention of contract support
costs. It refers to insurance money at 25 U.S.C. § 5388(j) and
§ 5325(m) — all without a mention of contract support costs.
To the contrary, by requiring Indian Health Service to pay
a secretarial amount sufficient to support the contracted-for
services, the Act repeatedly contemplates that the contracting
parties (a tribe and Indian Health Service) will not factor that
insurance money into the contract. Insurance money:
• “shall be treated as supplemental funding to that
negotiated in the funding agreement,” id.
§ 5388(j);
• “shall not result in any offset or reduction in the
amount of funds,” id.; and
• “shall not be a basis for reducing the amount of
funds otherwise obligated to the contract,” id.
§ 5325(m)(2).
B.
Swinomish’s counter-arguments are unavailing.
Swinomish points out that the Act requires the government
to fund any contract support cost related to “the Federal
program.” Id. § 5325(a)(3)(A)(i)-(ii). But in the context of the
Act, “the Federal program” does not encompass spending
insurance payments. As covered above, those sections refer to
“the Federal program that is the subject of the contract” and
“the Federal program, function, service, or activity pursuant to
the contract.” Id. (emphases added).
9
Swinomish is correct to say that it spends insurance money
on health services. But it also can spend money from the
Tribe’s general treasury on health services. And if a tribe
receives private or public grant funding, it can spend that
money on health services as well. If you take Swinomish’s
theory of the scope of “the Federal program” to its logical
conclusion, Indian Health Service would be on the line for
unlimited contract support costs based on the unlimited sources
of outside-the-contract funding available to a tribe. That’s not
what the Act requires. See supra pp. 6-8.
Swinomish is also right when it says it agreed to maintain
a Third Party Billing program under its contract with Indian
Health Service. But Swinomish does not point to any
outstanding costs that Indian Health Service still owes for
maintaining that program. And the Funding Agreement — the
contract on which contract support costs are owed in this case
— doesn’t say that Indian Health Service will pay costs for the
income the Third Party Billing program brings in. In other
words, Swinomish gets contract support costs with regard to
the billing program’s expenses, but not with regard to its
income.
That of course means that Swinomish’s backup
argument — that it contracted for the contract support costs in
question — fails. Perhaps the contract could have provided
that Indian Health Service would pay for any compliance costs
associated with any money spent from insurance revenue. But
it didn’t. Instead, Section 6 of the contract says contract
support costs “will be calculated and paid in accordance with”
the Act, with any other statutory restrictions, and with Indian
Health Service’s standard policy. J.A. 51-52. That policy does
not cover compliance costs related to insurance money. See
Indian Health Manual – Part 6, Chapter 3.
10
Next, Swinomish’s interpretation of 25 U.S.C. § 5388(c)
is also unpersuasive. Tribes can run health programs under
either Subchapter I or V of the Act. Section 5388(c) explains
the funding available to tribes under a Subchapter V contract,
like the Funding Agreement in this case:
The Secretary shall provide funds under a
funding agreement under this subchapter in an
amount equal to the amount that the Indian
tribe would have been entitled to receive
under self-determination contracts under this
chapter, including amounts for direct program
costs specified under [Subchapter I] and
amounts for contract support costs specified
under [Subchapter I], including any funds that
are specifically or functionally related to the
provision by the Secretary of services and
benefits to the Indian tribe or its members, all
without regard to the organizational level
within the Department where such functions
are carried out.
25 U.S.C. § 5388(c).
Swinomish says this provision expands the funds Indian
Health Service must pay a tribe under Subchapter V — the
subchapter under which Swinomish runs its health program.
The Tribe argues the phrase “including any funds . . . related to
the provision by the Secretary of services and benefits”
encompasses money received from patients’ insurers.
We disagree. The word “including” is first used to clarify
the types of funding already available under Subchapter I, not
expand them. This is consistent with the ordinary use of the
11
term. And nothing else in Section 5388(c) suggests
“including” should be given a different meaning when it is used
again in the same sentence. Absent any clear language that
Subchapter V tribes are entitled to more funds, like support
costs on expended income, Swinomish’s interpretation of
Section 5388(c) is not convincing.
Finally, Swinomish fears that an adverse decision today
will mean a tribe is penalized (with less funding) when it
chooses to directly bill third parties. See 25 U.S.C.
§ 1641(d)(1). To illustrate this fear, assume Indian Health
Service is in charge of the billing. It collects $200,000 in
insurance revenue. Indian Health Service must — and does —
spend all of this money on the program.
Now assume that a tribe contracts to collect third-party
insurance itself. It, too, earns $200,000 in revenue. And it, too,
must spend this money to improve the program. But
remember, the tribe is on the hook for additional compliance
costs the federal government doesn’t have to pay. Let’s say
those costs are 25% of whatever is spent on the program. So
we take the $200,000 in insurance money and subtract $50,000
to cover those extra-contractual compliance costs. In this
scenario, $150,000 is used on the program — $50,000 less than
when Indian Health Service, which didn’t have to account for
the compliance costs, was running the billing program.
Although Swinomish endorsed the assumptions behind
that hypothetical at oral argument, it is not at all clear that this
hypothetical reflects the reality. And more to the point, even
under the hypothetical, the government still fully funded “the
contract.” Id. § 5325(a)(2) (emphasis added). Because Indian
Health Service paid contract support costs attached to the
contract expenses, the Tribe didn’t have to spend its own funds
to comply with the Funding Agreement.
12
That is all the statute requires.
* * *
The Act does not require Indian Health Service to pay for
contract support costs on insurance money spent on the health
program. Nor did Indian Health Service contractually agree to
pay for those costs. We affirm the judgment of the district
court.