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On Friday the Biden administration announced a plan to spend $4 billion from the American Rescue Plan for pandemic relief in Indigenous communities. And of that amount half, or $2 billion, would be used to supplement third-party billing within the Indian health system.

This is one of those announcements that work on many levels. For most it’s just a big number. But if you know how Medicaid and other third-party insurance programs support the Indian health system … it’s a really big deal. Perhaps it's pulling one of the most significant levers that could lead to full funding for the Indian healthcare system. 

The White House announcement was set for 9 am EDT on Friday. About that time we had a call with Aliyah Chavez, who has been writing a lot of the stories in ICT about the new administration. Turns out that day she had been picked to ask a question at the White House briefing. All week Chavez had been working on her questions ranging from plans for the tribal nations conference to the number of Native Americans receiving appointments to work in this government.

(Previous: White House plans $4 billion COVID-19 response)

These are all questions that would never get asked in a White House briefing. Yet it seemed to us that the $2 billion Medicaid story was worthy of a follow-up question.

So Chavez asked: “The plan for $2 billion for third-party billing in the Indian health system shows the significance of Medicaid and other insurance programs. We know that some states are stingy with Medicaid regulations. Does this plan demonstrate the need for tribes to be treated like states so that they can develop their own eligibility rules and priorities?”

This question was clearly not in the White House briefing book.

Press Secretary Jen Psaki reported the earlier announcement and then added this: “So I would say that just as we are working with states directly — we are working with local communities, we have our own federal programs, pharmacy programs, and other programs — we will work directly with Indian Country to ensure that they have the resources, the funding, the vaccine supply needed in order to get the pandemic under control.”

But let’s parse Chavez's question and examine what it could mean.

The Indian health system is a combination of the federal Indian Health Service, tribal and nonprofit hospitals and clinics, and urban facilities that serve 2.56 million American Indians and Alaska Natives in 37 states. These days about 60 percent of that system is run by tribes or nonprofits; the federal government’s direct services — the Indian Health Service we think about — are the shrinking part of the system. It’s the tribal, nonprofit and urban programs that represent growth.

This is where Medicaid and other third-party insurance programs come in. Officially third-party billing is $1.3 billion of a $6 billion budget (in fiscal year 2020). But then there is an asterisk. And that’s because that budget line only includes federal facilities. Tribes, nonprofits and urban programs — the majority of the system — are not included. Indeed, there is no reporting mechanism for 60 percent of the Indian health system.

This is complicated and basically there are three reasons why this matters.

First: Many of the tribal, nonprofit and urban programs have become quite good at third-party billing making sure that as many patients as possible are covered by health insurance, especially since the enactment of the Affordable Care Act.

Second: Third-party billing, by law, is used to boost funding at the local facility. The dollars are billed at a clinic or a hospital and then stay at that facility.

And, third, and perhaps most important, Medicaid funding is automatic. Funding for the Indian Health Service goes through the process of appropriations every year. But Medicaid is an entitlement. If a patient is eligible, then the money is there.

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(Related: White House plans tribal nations conference this year)

That’s why Chavez’s question was so important. Medicaid is officially a state and federal partnership designed to provide insurance to people who cannot afford private insurance. The federal government pays each state a share of the cost and each state sets the rules for who is eligible and what services are covered. But the federal government also pays a 100 percent match for American Indians and Alaska Natives.

So a patient might go into a tribal facility in say, North Dakota, and be eligible for Medicaid insurance coverage and the clinic would be able to bill for those services. This is because North Dakota expanded Medicaid under the Affordable Care Act. But a family member who lives a few miles away, in South Dakota, would not get the same insurance coverage because the rules in South Dakota are different.

Yet in either case the federal government reimburses the state Medicaid program at 100 percent. 

This makes no sense.

The funding stream from Medicaid has been one of the most successful elements of the Affordable Care Act in Indian Country. The uninsured rate dropped and third-party billing is up (opening up a revenue stream that could permanently fund Indian health programs.)

And the divide between expansion states and non expansion states is significant. The Kaiser Family Foundation found in a 2017 report that the uninsured rate for nonelderly American Indians and Alaska Natives in states that implemented the Medicaid expansion fell by twice as much (from 23 percent to 15 percent between 2013 and 2015) as the rate in non-expansion states (from 25 percent to 21 percent).

Medicaid already insures more than one in four patients within the Indian health system and half of all children.

Kaiser reports that too many of our tribal citizens do not have health insurance through work, “because they have a lower employment rate and those working often are employed in low-wage jobs and industries that typically do not offer health coverage. Medicaid and other public coverage help fill this gap.”

And even with this Medicaid coverage (and partly because of state government recalcitrance) American Indians and Alaska Natives are significantly more likely to be uninsured, 17 percent compared to 11 percent nationally.

But what if tribes, not states, set the rules for eligibility? This could happen by treating tribes as states (saving a lot of bureaucratic steps) or by issuing specific waivers or even creating a managed care system that directs full Medicaid funding to the Indian health system as an entity.

That takes us back to Aliyah Chavez’s question. The White House announcement Friday is looking at the past. The $2 billion for third-party billing would replace funding lost during the pandemic.

But what’s ahead? Could Medicaid reform change the nature of funding in the Indian healthcare system?

That’s a question still waiting to be answered. But one thing we know for sure is that a tribal expansion of Medicaid would reduce the number of uninsured in Indian Country — and provide a permanent funding boost for the Indian health.

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