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Rancheria v. Hargan

United States District Court, District of Columbia

November 7, 2017

REDDING RANCHERIA, a federally recognized Indian tribe, Plaintiff,
ERIC D. HARGAN, Acting Secretary, United States Department of Health and Human Services, et al., Defendants.


          ROSEMARY M. COLLYER United States District Judge

         The provision of health care for American Indians has historically been, and remains, plagued by chronic funding shortages and ineffective provision of services. A 2003 report from the United States Commission on Civil Rights found:

The unmet health care needs of Native Americans remain among the most severe of any group in the United States. Despite their need for health care and although there are designated health services, the monetary value of Native American care is significantly less than the average health expenditure for all Americans. [The Indian Health Service's] real spending per Native American, after adjusting for inflation and population growth, has fallen over time, despite funding increases.[1]

         This case arises out of the Redding Rancheria Tribe's attempt to create a tribally-funded self-insurance program and coordinate its benefits with those available from the Indian Health Service to make efficient use of all available resources. The Tribe has attempted to obtain reimbursement for health services provided by its compact with the federal government under the Indian Self-Determination and Education Assistance Act. The Department of Health and Human Services and its constituent agency the Indian Health Service have repeatedly refused to consider the Tribe's reimbursement requests because they dispute the legitimacy of the Tribe's coordination of federal benefits with its self-insurance program. IHS insists that it is barred from reimbursing the Tribe due to a payor of last resort provision in the Indian Health Care Improvement Act, 25 U.S.C. §§ 1601 et seq. (2012), as amended by the Affordable Care Act in 2010.

         Having reviewed the entire record, the Court concludes that the agency's interpretation of the payor of last resort provision is inconsistent with a plain reading of the statute and congressional intent, and will remand to IHS for reconsideration of the Tribe's requests for reimbursement in a manner consistent with this opinion.

         I. FACTS

         A. The Tribe's Compact and Funding Agreement

         Congress enacted the Indian Self-Determination and Education Assistance Act (ISDEAA), 25 U.S.C. §§ 5301 et seq., in recognition of “the obligation of the United States to respond to the strong expression of the Indian people for self-determination by assuring maximum Indian participation in the direction of . . . Federal services to Indian communities.” Id. § 5302(a). The establishment of a “meaningful self-determination policy” was designed to “permit an orderly transition from the Federal domination of programs for, and services to, Indians to effective and meaningful participation by the Indian people in the planning, conduct, and administration of those programs and services.” Id. § 5302(b). Consistent with these aims, the ISDEAA creates a mechanism for the negotiation of self-determination contracts:

The Secretary is directed, upon the request of any Indian tribe by tribal resolution, to enter into a self-determination contract or contracts with a tribal organization to plan, conduct, and administer programs or portions thereof.

Id. § 5321(a)(1). “Under a self-determination contract, the federal government supplies funding to a tribal organization, allowing [the Tribe] to plan, conduct and administer a program or service that the federal government otherwise would have provided directly.” FGS Constructors, Inc. v. Carlow, 64 F.3d 1230, 1234 (8th Cir. 1995).

         On August 16, 2011, the Redding Rancheria Tribe entered into a self-determination contract (the Compact) with IHS along with an accompanying Funding Agreement in order “[t]o enable the Redding Rancheria Tribe to redesign programs, activities, functions and services of the Indian Health Service.” Compact [Dkt. 45-1] at IHS000323. The Funding Agreement “obligates the Tribe to be responsible for and to provide health programs, functions, services and activities.” Funding Agreement [Dkt. 45-1] at IHS000313 (FA). One of the programs transferred to the Tribe's administration was the Contract Health Services program (CHS).

         CHS pays for “health services provided at the expense of the Indian Health Service from public or private medical or hospital facilities other than those of the Service.” 42 C.F.R. § 136.21 (2017). CHS pays only for services that are medically necessary and “not reasonably accessible or available” through an IHS or tribal facility. Id. § 136.23. CHS is not an entitlement program and is limited to the available funding from Congress. As such, CHS is a “payor of last resort, ” and must determine, before paying for medical services, that there is no alternative source of payment for which an Indian is eligible. 25 U.S.C. § 1623. “Alternate resources” include Medicare, Medicaid, and private insurance. 42 C.F.R. § 136.61(c).

         Because CHS funds are limited, Congress established the Catastrophic Health Emergency Fund (CHEF) in 1988, which is administered by the Secretary through IHS “for the purpose of meeting the extraordinary medical costs associated with the treatment of victims of disasters or catastrophic illnesses who are within the responsibility of IHS.” S. Rep. No. 100-508, at 6193 (1988). CHS programs are reimbursed by CHEF if the cost of treatment for an individual exceeds a threshold amount of $25, 000. See 25 USC § 1621a(d)(2). Article IV, section 4 of the Tribe's Compact provides that “the United States will maintain the Tribe's eligibility for [CHEF] money.” Compact at ISH000335.

         In addition to its CHS program, in January 2012, the Tribe established its own Tribal Self-Insurance Program (referred to in the record as TSIP) to increase the availability of monies for health care for Tribal members. The Tribal Self-Insurance Program provides access to care at discounted rates through an arrangement with Anthem Blue Cross. In comparison, CHS reimburses health care providers at Medicare-like rates. For certain care needs, the Tribal Self-Insurance Program can purchase coverage at lower rates while for other needs, CHS is able to obtain a lower rate. To conserve resources so the Tribe pays the lowest possible rate, the Tribal Self-Insurance Program contains an exclusionary clause that excludes from coverage those services that are eligible for Medicare-like rates and those services eligible for CHEF reimbursements. Master Plan Document [Dkt. 45-2] at IHS000420-21. The TSIP Coordination Policy further provides that the Tribal Self-Insurance Policy “will not be treated as an alternate resource” for purposes of the payor of last resort rule. TSIP Coordination Policy [Dkt. 45-3] at IHS000489.

         While the Tribe was sometimes able to secure the best rate by paying for care through the CHS program, for other care more favorable rates could be secured if the Tribe paid directly. See Tribe's Mot. for Summ. J. [Dkt. 34] at 2. To take advantage of the optimal rate, the Tribe also developed a Coordination of Benefits (referred to in the record as COB) program between the Tribal Self-Insurance Program and CHS, allowing the former to “pay any claim otherwise covered by the express terms of [TSIP] on a provisional basis pending a final determination under the COB.” Master Plan Document at IHS000482. In the event that the Tribal Self-Insurance Program makes a provisional payment and “it is confirmed that IHS or CHS should have been primary under this COB . . . [TSIP] shall be entitled to reimbursement for the IHS or CHS program.” Id. If the provisional payment turns out to be for care eligible for Medicare-like rates under CHS, the Tribal Self-Insurance Program makes an immediate payment “on behalf of and as a distribution agent for the CHS program” in order to maintain eligibility for the Medicare-like rates. Id. By having its self-insurance program make immediate, but provisional, payments on behalf of CHS, the Tribe increases the fiscal efficiency of its payment process and conserves resources by ensuring that it will always pay the lowest available rate.

         B. The Tribe's CHEF Applications

         In 2012 and 2013, the Tribe submitted six CHEF applications for care that was covered by the Tribe's CHS program and eligible for CHEF reimbursement. See Tribe's Mot. for Summ. J. at 12. For each of these applications, the Tribal Self-Insurance Program had made provisional payments until it could be determined what program was the primary payor. See id. at 12-13. Once it was determined that the charges were CHS obligations, CHS reimbursed the Tribe's insurance program and submitted the six CHEF applications. See id. When the Tribe did not receive any response, it contacted CHEF and arranged a teleconference with IHS on March 15, 2013. See Declaration of Tracy Edwards [Dkt. 45-4] at Redding001861 (Edwards Decl.). IHS took the position that the CHEF applications could not be processed because CHEF cannot reimburse payments to a tribal self-insurance plan, but can only reimburse valid CHS payments. See id. at Redding001861-62. IHS insisted that the CHS program should have paid vendors directly with paper checks issued by CHS. See First Request for Consultation [Dkt. 45-1] at IHS000013. IHS also noted some technical problems with the applications including payment of reimbursements without paper checks, the use of a separate Excel spreadsheet, and the use of a different font size. See Edwards Decl. at Redding001863. The Tribe explained that all the applications were for valid CHS benefits and that the Tribal Self-Insurance Program had made provisional payments in accord with its coordination of benefits system. See First Request for Consultation at IHS000011; Edwards Decl. at Redding001862. On a follow-up call held on March 21, 2013, IHS provided no further insight into the denial of the CHEF applications. See id.

         C. The Request for Consultation and Administrative Waiver

         On March 26, 2013, the Tribe requested a consultation regarding its CHEF applications and to clarify its coordination of benefits. See First Request for Consultation at IHS000010-22. The Tribe challenged the reasons given by IHS for denying the CHEF applications as not based on any statutory or regulatory requirement. See id. at IHS000015. Alternatively, it argued that it was entitled to an administrative waiver.[2] See id. at IHS000018.

         Again receiving no response, the Tribe submitted a follow-up request for consultation on April 10, 2013. See Second Request for Consultation [Dkt. 45-1] at IHS000302. After a series of exchanges, IHS attended a Tribal Delegation Meeting on June 5, 2013, after which the Tribe re-submitted its CHEF applications to resolve the technical formatting issues. See Tribe's June 5, 2013 Letter [Dkt. 45-1] at IHS000526.

         On June 13, 2013, IHS indicated that the Tribe's re-submitted applications were under review and that IHS was working to schedule a “30-minute meeting” between Redding Rancheria and the IHS Director. IHS's June 13, 2013 Letter [Dkt. 45-1] at IHS000528. In response, the Tribe clarified that it was requesting “meaningful dialogue between two governments to address substantive issues, ” and not merely a “30-minute meeting.” Tribe's June 18, 2013 Letter [Dkt. 45-1] at IHS000529. No meeting occurred. See Compl. [Dkt. 1] at 12.

         By letter dated August 8, 2013, IHS Acting Director Dr. Yvette Roubideaux confirmed that IHS had again denied the Tribe's CHEF applications because: “(1) the Tribe is seeking reimbursement for payments made to its Tribal self-insurance plan; (2) such payments are not valid CHS obligations; and (3) only valid CHS obligations are reimbursable under the CHEF.” IHS's August 8, 2013 Decision Letter [45-1] at IHS000076 (CHEF Decision Letter). Dr. Roubideaux indicated that IHS would “coordinate consultation as requested in the March 26, 2013-dated letter” from the Tribe. Id. at IHS000077.

         Dr. Roubideaux denied the Tribe's request for an administrative waiver because it was “inconsistent with the Agency's statutory responsibility to maintain procedures governing the reimbursement of the CHEF.” Id. at IHS000077. IHS asserted that it was required to “ensure that all CHS programs are given the same opportunity to seek reimbursement . . . [and] treated in a fair and uniform manner” and it could not, therefore, waive administrative requirements for the Tribe. Id.

         D. The Second Request for Waiver

         On October 15, 2013, the Tribe again submitted a request for a regulatory “waiver of the specific procedures and regulatory or other legal requirements, if any, that IHS has relied upon in its August 8, 2013 denial.” Request for Waiver Letter [Dkt. 45-2] at IHS000506.

         By letter dated January 16, 2014, IHS again rejected the Tribe's waiver request, this time on the theory that regulatory waivers only apply to regulations that implement the ISDEAA. See Denial of Second Request for Waiver [Dkt. 45-3] at IHS000503. IHS reasoned that the administration of CHEF is outside the scope of the ISDEAA and its implementing regulations so that the regulatory waiver process is inapplicable to CHEF guidelines. See Id. at IHS000501.

         E. The Final Offer

         On October 15, 2013, the Tribe submitted a Final Offer pursuant to the ISDEAA, which provides “[i]n the event the Secretary and a participating Indian tribe are unable to agree . . . on the terms of a compact or funding agreement . . ., the Indian tribe may submit a final offer to the Secretary.” 25 U.S.C. § 5387; Final Offer Letter [Dkt. 45-1] at IHS000107. The Final Offer requested approval of an amendment to the Compact and Funding Agreement that would clarify “the Tribe's understanding of its Compact rights to coordinate member care and its exemption from IHS guidance, manuals, and rules . . . that have been applied to prevent that coordination.” Final Offer Letter at IHS000108.

         In a letter dated December 4, 2013, IHS rejected the Tribe's Final Offer. See Denial of Final Offer [Dkt. 45-2] at IHS000098. Under the ISDEAA, if the Secretary rejects a final offer, “the Secretary shall provide timely written notification to the Indian tribe that contains a specific finding that demonstrates” one of four criteria. 25 U.S.C. § 5387(c)(1). IHS denied the Tribe's Final Offer, relying on two of the criteria: (1), “the amount of funds proposed in the final offer exceeds the applicable funding level to which the Indian tribe is entitled, ” and (2), “the program, function, service, or activity (or portion thereof) that is the subject of the final offer is an inherent Federal function that cannot legally be delegated to an Indian tribe.” Id. § 5387(c)(1)(A)(i) and (ii).

         F. The Contract Disputes Act Claim

         On October 15, 2013, the Tribe submitted a claim to IHS under the Contract Disputes Act (CDA), 41 U.S.C. §§ 7101-7109. The CDA Claim alleged that, by enforcing internal agency rules against the Tribe's CHS program and failing to consult with the Tribe, IHS was “in breach of its duties under the Compact, ISDEAA, and [Indian Health Care Improvement Act].” CDA Claim [Dkt. 45-1, 45-2] at IHS000024-25. In a letter dated December 17, 2013, IHS rejected the Tribe's CDA claim. See Denial of CDA Claim [Dkt. 45-2] at IHS000001.


         A. ...

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