Becerra v. San Carlos Apache Tribe
The Supreme Court ruled 5-4 that the federal Indian Health Service must pay the administrative overhead costs that tribes incur when spending Medicare, Medicaid, and private insurance payments on healthcare programs they assumed from the government.
The decision resolves a decades-long dispute over Indian healthcare funding, siding with tribes that argued they should not face higher effective costs than the federal government when running the same healthcare programs.
How it got here: Both tribes sued the federal government for breach of contract; federal district courts dismissed both suits; the Ninth and Tenth Circuits separately reversed; the government asked the Supreme Court to step in and the Court agreed to hear both cases together.
The Case in Depth
What happened
Two Native American tribes — the San Carlos Apache Tribe in Arizona and the Northern Arapaho Tribe in Wyoming — took over federal healthcare programs under self-determination contracts with the Indian Health Service. In addition to receiving federal appropriations, both tribes collected insurance payments from Medicare, Medicaid, and private insurers as part of running those programs. Both tribes sued the federal government, arguing it owed them reimbursement for the administrative overhead they had to spend while managing and spending those insurance payments on tribal healthcare.
The question before the Court
Must the federal government reimburse Native American tribes for the administrative overhead they incur when spending Medicare, Medicaid, and private insurance payments on tribal healthcare programs they took over from the federal government?
The Court's answer
Yes — the Court ruled that the Indian Health Service must pay these overhead costs. Under the Indian Self-Determination Act, tribes that assume control of federal healthcare programs are entitled to "contract support costs" — extra administrative expenses that the federal government doesn't have to pay when it runs the programs itself but that tribes must pay on their own. Each self-determination contract, by operation of federal law, requires tribes to collect insurance payments from Medicare, Medicaid, and private insurers and spend that money on the healthcare programs they took over. Because spending that income is a contractual obligation — not a voluntary choice — the overhead incurred in doing so is a cost of complying with the contract and is therefore eligible for reimbursement.
The Court rejected the government's argument that only overhead tied to federal appropriations qualifies. The Indian Health Service itself uses both appropriated funds and third-party insurance payments to run the same programs; when those programs are handed to a tribe, the tribe steps into IHS's shoes for the full program — insurance-funded portions included. Denying reimbursement for that overhead would leave tribes systematically worse off than the federal agency, a result Congress specifically designed the statute to prevent.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
Tribal healthcare programs across the country that rely on Medicare and Medicaid income — which can represent 60% or more of some facilities' budgets — will now be entitled to federal reimbursement for the overhead costs of managing that income. Without this reimbursement, tribes had been forced to dip into patient-care funds to pay administrative expenses that the Indian Health Service never had to cover itself.
What changes now
The cases are resolved in the tribes' favor. On remand, the San Carlos Apache Tribe may pursue roughly $3 million in unpaid contract support costs for its three-year contract, and the Northern Arapaho Tribe may pursue approximately $1.5 million for two years. More broadly, all tribes that have spent third-party insurance income on programs assumed from IHS may now seek reimbursement for associated overhead costs, a universe the government estimates could total $800 million to $2 billion in additional federal expenditure per year, plus potential retroactive claims.
What this does not decide
The Court explicitly did not decide how much flexibility tribes have to spend program income on activities that go beyond the specific programs listed in their contracts. It also did not decide whether § 5325(a)(3)(A) can independently authorize contract support costs without satisfying § 5325(a)(2)'s definition — tribes may only recover costs meeting both provisions.
Concurrences and dissents
Dissent — Justice Kavanaugh
Justice Kavanaugh argued that the Indian Self-Determination Act simply does not authorize the federal government to cover the overhead costs of spending Medicare and Medicaid income that tribes collect under a separate statute — the Indian Health Care Improvement Act. In his view, contract support funding covers only costs the tribe must incur to perform its actual self-determination contract, while third-party insurance payments are supplemental funds that tribes may spend on 'any health care-related purpose,' including construction projects never mentioned in the contracts. Because those costs are not 'directly attributable' to the self-determination contracts, he would have ruled for the government and left the policy decision — with potential costs of $800 million to $2 billion per year — to Congress.
How the Court got there
The legal reasoning, step by step
- The Court started with § 5325(a)(2) of the Indian Self-Determination Act (ISDA), which defines 'contract support costs' as the reasonable costs for activities a tribe must carry on 'to ensure compliance with the terms of the contract.' The governing benchmark is what the contract requires — not what IHS happens to fund through appropriations alone.
- Every self-determination contract incorporates § 5325(m)(1) by operation of law, which requires tribes to use third-party insurance payments — called 'program income' — 'to further the general purposes of the contract,' meaning the healthcare programs the tribe assumed from IHS. Collecting and spending that income is therefore a contractual obligation, making the overhead incurred in doing so a cost of contract compliance.
- The resulting overhead qualifies under both categories of eligible costs in § 5325(a)(3)(A): direct costs incurred 'for the operation of the Federal program that is the subject of the contract,' and indirect costs incurred 'in connection with the operation of the Federal program.' Because IHS itself relies on third-party payments as a major funding source for those very programs, the programs retain their mixed-funding character when transferred to a tribe.
- The government's reliance on § 5326's limitations failed. That provision bars reimbursement for costs not 'directly attributable' to the self-determination contract and for costs 'associated with' contracts between a tribe and entities other than IHS. The Court held that both conditions are met here: the self-determination contract itself creates the obligation to collect and spend program income, and Medicare/Medicaid provider agreements merely allow the tribe to collect money — they do not require the healthcare activities that generate the overhead.
- Denying reimbursement would create a structural 'self-determination penalty' directly contrary to ISDA's design. IHS covers its own programs using both federal appropriations and third-party insurance payments — third-party collections represent more than 60% of some IHS facilities' budgets. If tribes cannot get overhead reimbursed for the insurance-funded portion of those same programs, they end up systematically worse off than IHS when operating the identical programs, which is exactly the funding gap Congress built contract support costs to eliminate.