States Should Protect Medicaid Funding in Indian Country

Everyone should be able to see a doctor when they are sick, afford their prescriptions, and get the preventative care their family needs. For tribal citizens — people who are members of federally recognized American Indian Tribes or are Alaska Natives (AIAN) — this can be a challenge in the best of times. The harmful Republican megabill’s nearly $1 trillion in cuts to Medicaid threaten health care for tribal citizens and other people across the country.

Tribal citizens are more than twice as likely to have Medicaid coverage as their white counterparts, with 40 percent of the non-elderly AIAN population served by Medicaid. While tribal citizens are exempt from the punishing work requirements included in the Republican megabill, other changes that states may make to their Medicaid programs in its wake will have an outsized effect on tribal citizens, particularly in those states with significant AIAN populations.

State policymakers will have to grapple with funding challenges as the megabill shifts Medicaid costs from the federal government to the states. As state lawmakers consider their options, it’s important for them to know that the federal government will still pay 100 percent of Medicaid costs for eligible tribal citizens who both qualify for Medicaid in their states and receive care at Indian Health Service and tribal facilities. States should not cut provider payments or services for AIAN Medicaid enrollees who receive care at Indian Health Service and tribal facilities because the cuts will not only harm those enrollees and their communities, but they will not save the state any money.

As they consider options for their state Medicaid programs, here is what state lawmakers need to know about Medicaid funding in Indian Country.

1. The Federal Government Has a Duty to Provide Health Care to Tribal Citizens

   The federally supported Indian Health Service (IHS), part of the U.S. Department of Health and Human Services, and tribal health facilities, which are operated by Tribes but carry out the obligations of IHS, provide care to many tribal citizens. Medicaid is a crucial third-party payer that helps IHS and tribal health facilities provide care to both tribal citizens who are eligible for Medicaid and those who are not who receive their care at these facilities.

   The federal government pays the entire cost of Medicaid services delivered at IHS and tribal health facilities to tribal citizens who qualify for Medicaid. This is because the federal government has a duty to provide health care to tribal citizens, an aspect of the federal government’s centuries-old federal trust responsibility to the Tribes. This trust responsibility dates to the colonization of North America and is centered on the obligation that the United States has to those governments that preexisted it within the borders of this country.

2. The Federal Government Covers the Full Cost of Medicaid for Eligible AIAN Beneficiaries

   While the federal government normally matches states’ Medicaid costs at a specified percentage (the federal medical assistance percentage, or FMAP), services provided to AIAN enrollees in IHS and tribal health facilities are matched at 100 percent. Services for Medicaid-eligible tribal citizens who receive care at other facilities are matched at the state’s regular matching rate or, for low-income adults who gained coverage as a result of the Affordable Care Act’s Medicaid expansion, at the enhanced 90 percent matching rate.

   The states are fulfilling part of the federal trust responsibility by administering the Medicaid program for tribal citizens who qualify for Medicaid in their states, but the federal government pays the costs. So before cutting provider payments or services for AIAN Medicaid enrollees who receive care at IHS and tribal facilities, states should remember that the cuts will not actually save the state any money.

3. Medicaid Is a Crucial Part of the Funding Ecosystem for Health Care in Indian Country

   While the 100 percent federal Medicaid matching is significant, that is only part of the story. In recognition that Congress chronically underfunds IHS and tribal health facilities by failing to appropriate sufficient money to meet the demand for services, Congress codified in the Indian Health Care Improvement Act that IHS and tribal health facilities could be reimbursed by Medicaid (as well as Medicare, Veterans Affairs, and private insurance) for services to eligible tribal citizens and, as IHS explains, that “the reimbursements received or recovered must be credited to and remain at the local facility for use.”

   The Indian Health Care Improvement Act is clear that these third-party reimbursements may not be used to supplant appropriated funding, much of which funds overhead costs for IHS and tribal health facilities. But Medicaid reimbursement can support AIAN health in other ways, allowing the appropriated funding to go further.

   Reimbursements from Medicaid, Medicare, and third-party insurers can account for more than 60 percent of funding for individual IHS and tribal health facilities, providing a critical source of funding for these facilities. In fiscal year 2023, Medicaid alone accounted for nearly three-quarters of the third-party reimbursements received by IHS and tribal health facilities, meaning that Medicaid funding plays a significant role in the direct provision of a broad range of health care services in Indian Country, including for those who are not eligible for Medicaid. For example, Medicaid reimbursement can support IHS and tribal facilities’ ability to provide additional health care services to uninsured or underinsured tribal citizens or engage in public health services which are not funded by Medicaid, such as deploying community health representatives to improve access to health care.

The federal trust responsibility to Indian Tribes and Alaska Native Communities is complex, and aspects of it can be obscured by layers of government and conflicting jurisdictions. This complexity, stacked on top of the challenges of Medicaid administration generally, could result in states unintentionally jeopardizing critical funding that protects the health of AIAN communities.

However, with 100 percent of the Medicaid dollars that flow to IHS and tribal health facilities coming from the federal treasury, states have an opportunity to protect this critical funding source without impacting their state budgets. As states face challenges from the Republican megabill, they should take care to understand how their administration of Medicaid could impact Indian Country and shape their policy decisions accordingly.