Indian Self-Determination Contracting:

Effects of Individual Community Contracting for Health Services in Alaska

HEHS-98-134: Published: Jun 1, 1998. Publicly Released: Jun 1, 1998.

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Pursuant to a legislative requirement, GAO reviewed the impact of individual Indian Health Service (IHS) contracts, focusing on the: (1) extent to which Alaska Native communities contract directly with IHS to manage their own health care services; and (2) effects these contracts are having on costs and the availability of services.

GAO noted that: (1) relatively few Alaska Native communities have contracted directly with IHS, and those that have done so generally contracted for a limited range of health services and thus continue to receive many services through a regional health organization (RHO); (2) fifteen percent of the 227 Alaska Native communities have some form of direct contract with IHS; (3) the dollar amount of these direct contracts represents about 6.5 percent of all IHS contracts in Alaska under the Indian Self-Determination Act; (4) GAO found that communities with their own contracts have higher administrative costs than RHOs; (5) IHS works with each contractor to determine the amount of administrative costs needed to manage the contracts; (6) indirect costs--the major component of the administrative costs--include such expenses as financial and personnel management, utilities and housekeeping, and insurance and legal services; (7) community contracts need about twice the amount of indirect costs that a RHO would need to manage the same programs; (8) when a community chooses the contract directly with IHS for services previously provided by a RHO, it also has a need for one-time start-up costs that increase the administrative cost differences between community contracts and RHOs; (9) determining the effects of individual community contracts on service availability proved difficult because contracts involving a switch from RHOs to local communities are relatively few in number, cover few services, and some have been in effect for a short time; (10) the limited comparisons that can be made show that service levels have not been greatly affected by the switches thus far; (11) however, under current IHS funding limitations, new contractors are receiving only part of their funding needs for administrative costs and may have to wait several years to receive full funding; (12) if communities decide to contract for service programs but do not receive full funding for administrative costs and do not have other resources from which to pay for these costs, they face the risk of having to divert funds from services to cover their unfunded administrative costs; (13) while funding shortfalls have not yet resulted in widespread adverse effects on health services availability in Alaska, the long-term picture raises cause for concern; and (14) in choosing to operate their health services without waiting for sufficient administrative funding, Alaska Native communities may have little option but to accept a potential for reduced services as a trade-off for managing elements of their health care systems.

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