Becerra v. San Carlos Apache Tribe
The Supreme Court ruled that the federal government must reimburse the administrative overhead costs Native American tribes incur when spending Medicare, Medicaid, and private insurance payments to run healthcare programs they have taken over from the Indian Health Service.
The decision, which affects hundreds of tribes that have entered self-determination contracts to manage their own healthcare, could require an additional $800 million to $2 billion in federal spending annually — a financial shift the four dissenting justices argued should be left to Congress.
How it got here: Both tribal district court cases were dismissed; the Ninth Circuit (San Carlos Apache) and Tenth Circuit (Northern Arapaho) each reversed; the federal government sought and received Supreme Court review of both cases, which were argued together.
The Case in Depth
What happened
The Indian Health Service provides healthcare to tribal members, but a 1975 federal law lets tribes take over and run those programs themselves under "self-determination contracts," with federal funding including extra "contract support costs" to cover unique overhead. Tribes may also bill Medicare, Medicaid, and private insurers for services and must spend that income on their healthcare programs. Two tribes — the San Carlos Apache in Arizona and the Northern Arapaho in Wyoming — sued the government for refusing to pay contract support costs tied to overhead incurred when spending that insurance billing income.
The question before the Court
When Native American tribes take over federal healthcare programs under self-determination contracts, must the government also cover the overhead costs tribes incur when spending Medicare, Medicaid, and private insurance payments on those programs?
The Court's answer
Yes — the Indian Self-Determination and Education Assistance Act requires the federal government to cover the overhead and administrative costs that tribes incur when they spend Medicare, Medicaid, and private insurance payments to run the healthcare programs they have taken over from the Indian Health Service.
The law defines "contract support costs" by reference to what the terms of a self-determination contract require. Every such contract legally incorporates a requirement for tribes to collect insurance payments — called "program income" — and spend them to further the healthcare functions transferred from the government. That makes the overhead of handling that income a cost the tribe "must" incur to comply with its contract, and therefore a cost the government must cover. The limitations in a separate statutory provision restricting contract support to costs "directly attributable" to self-determination contracts are satisfied because the contract itself mandates the collection and spending of program income.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
Tribes that have assumed control of their own healthcare programs from the federal government can now claim reimbursement for overhead costs tied to billing Medicare, Medicaid, and private insurers — costs they had previously been absorbing themselves. The ruling potentially adds hundreds of millions of dollars in new obligations each year, and could shift federal healthcare dollars among the country's 574 federally recognized tribes.
What changes now
The cases return to the lower courts where the tribes can pursue reimbursement for specific contract support costs incurred when spending program income. The ruling applies going forward and potentially opens the door to substantial retroactive claims across many tribes. Congress could respond by increasing appropriations for Indian healthcare or amending the statute, but the Court's decision stands unless and until it does.
What this does not decide
The Court explicitly declines to decide how much flexibility tribes have to spend program income on activities that go beyond the specific healthcare programs listed in their contracts. It also does not decide whether § 5325(a)(3)(A) provides an independent basis for contract support costs entirely separate from the requirements of § 5325(a)(2).
Concurrences and dissents
Dissent — Justice Kavanaugh
“But today, the Court upends that long-settled understanding and requires the Federal Government to furnish additional funding to the tribes for the costs of spending the third-party income.”Kavanaugh's objection that the ruling overturns three decades of consistent executive branch interpretation of the statute.
Justice Kavanaugh argued that contract support funding under § 5325(a)(2) covers only the costs a tribe must incur to comply with its self-determination contract — not the separate overhead of spending Medicare and Medicaid income, which tribes may spend on 'any health care-related purpose' well beyond contracted programs. He also invoked § 5326, arguing the costs of spending third-party income are not 'directly attributable' to self-determination contracts and are 'associated with' the Medicare and Medicaid provider agreements tribes enter with non-IHS entities. He warned the ruling could cost $800 million to $2 billion annually and shift money from poorer tribes — which rarely self-administer healthcare — to wealthier ones.
How the Court got there
The legal reasoning, step by step
- The core question turned on 25 U.S.C. § 5325(a)(2), which defines 'contract support costs' as the reasonable costs of activities a tribe must carry on 'to ensure compliance with the terms of the contract.' The Court held the controlling test is what the contract requires — not just what the congressionally appropriated 'Secretarial amount' covers — so contract support costs can extend to overhead tied to program income.
- Every self-determination contract legally incorporates § 5325(m)(1), which requires tribes to collect program income from insurers and use it 'to further the general purposes of the contract' — meaning the specific healthcare functions transferred from the Indian Health Service. This makes spending program income a contractual obligation, not an optional activity, so the overhead of doing so is covered by the contract support cost definition.
- The overhead costs from spending program income qualify under both eligible categories in § 5325(a)(3)(A): direct costs (specific program expenses like workers' compensation for ambulance drivers) and indirect costs (shared overhead like auditing and personnel systems), because both arise from operating the federal healthcare program the tribe agreed to run in place of the government.
- Section 5326's restriction — that contract support costs must be 'directly attributable' to self-determination contracts and not 'associated with' contracts the tribe has with any non-IHS entity — does not block recovery here. The self-determination contract itself requires collecting and spending program income. Medicare and Medicaid provider agreements merely serve as a billing mechanism; they do not dictate what healthcare services tribes must provide or how the spending occurs.
- Historical context confirmed this reading: Congress added § 5326 in 1998 to overturn a Tenth Circuit ruling (Ramah Navajo Chapter v. Lujan) that had required the government to pay overhead for state contracts — not federal self-determination contracts. In that case, the costs were driven by separate state agreements; here, the self-determination contract itself is the direct source of the obligation to spend program income.
- The overall design of the law — which aims to put tribes on the same financial footing as the Indian Health Service — reinforced this conclusion. The government's own healthcare facilities rely on third-party billing for 60 percent or more of some facilities' budgets. Denying tribes contract support costs for the parallel spending would force them to divert program income to cover overhead out of pocket, creating the very funding disadvantage Congress designed the statute to eliminate.
Doctrinal impact
Cases affected by this decision
Distinguishes Ramah Navajo Chapter v. Lujan
That case involved overhead costs driven by separate state contracts; here the self-determination contract itself requires the spending.