What Does the Indian Health Service Finance—and How Does That Relate to Need?
The IHS is at the center of Indian health financing, but its
appropriation is only one part of the larger financing system.
To understand the IHS financing story, we need to look at what
the system pays for, who it serves, and what the funding does not cover.
The IHS Is a Financing Institution and a Health Care System
The Indian Health Service is a federal agency within the
Department of Health and Human Services. It carries out federal
responsibilities for health services to American Indians and
Alaska Natives through a system that includes federally operated
services and programs operated by Tribes and Tribal organizations.
The IHS financing story therefore begins with federal
appropriations. But the story does not end there. The IHS system
also interacts with Medicaid, Medicare, private insurance,
Purchased/Referred Care, and other resources.
The central idea
The IHS appropriation finances an important part of Indian
health care, but it should not be confused with total health
spending for American Indians and Alaska Natives.
What Does the IHS Appropriation Support?
IHS appropriations support a broad range of activities rather
than a single medical service. These include direct health
services, facilities and infrastructure, public health and
preventive activities, administration, and Purchased/Referred
Care.
The precise organization of the budget changes over time, so
researchers need to identify the fiscal year and the particular
budget account or activity being measured.
Direct Care
Health services delivered through IHS and Tribal
facilities, including hospitals, clinics, and other
direct-care settings.
Purchased/Referred Care
Care purchased from outside providers when appropriate
services are unavailable or cannot be provided through
the direct-care system.
Public Health
Population health, prevention, community health,
and other activities that are not simply individual
clinical encounters.
Facilities and Infrastructure
Facilities, equipment, maintenance, construction,
and other investments needed to operate the Indian
health system.
Direct Care and Purchased Care Are Different
One of the most useful distinctions in understanding IHS
financing is between direct care and
Purchased/Referred Care.
Direct care is delivered through IHS or Tribal health facilities.
PRC, by contrast, purchases services from outside providers when
the Indian health system cannot reasonably provide the needed
service.
IHS describes PRC as a supplement to other health resources and
uses it when, among other circumstances, no IHS or Tribal direct
care facility exists, required emergency or specialty care is
unavailable, or facility capacity has been exceeded. IHS also
applies alternate-resource requirements before PRC funds are used.
such as Medicare, Medicaid, or private insurance.
Who Is Being Counted?
A central research problem is deciding which population is being
measured. The IHS service population is not necessarily the same
as the American Indian and Alaska Native population reported by
the Census, and neither should automatically be treated as the
number of people using IHS services in a particular year.
For financing research, the distinction between a broad
population estimate and the people actually using Indian health
services can materially change a per-person spending estimate.
This is one reason the concept of active users
becomes important in Indian health financing research. The
researcher must be clear about the definition, year, and source
of the population measure being used.
The Budget Is Not the Same as Need
A budget tells us how much money has been appropriated or made
available for particular purposes. It does not, by itself, tell
us how much health care the population needs.
A financing analysis therefore has to connect at least four
concepts: population, utilization, financing, and
need.
A population can grow while appropriations grow more slowly.
Utilization can change even when the population does not.
Medical costs can rise. The mix of services can change.
And other financing sources can offset some, but not all,
of the difference.
A research caution
A larger IHS appropriation does not automatically mean that
Indian health is adequately financed. Adequacy requires a
comparison between available resources and the services and
health needs of the population being studied.
Why Active Users Matter
Per-person measures are especially sensitive to the denominator.
If a study divides IHS spending by a broad AI/AN population
estimate, the result answers a different question than a study
that uses people actually receiving Indian health services.
The choice of denominator should therefore be stated explicitly.
Researchers should also be cautious about comparing measures
across years when the underlying population definition has changed.
This issue will return later in the course when we examine data,
enrollment, and methods for measuring Indian health financing.
What the IHS Financing Story Tells Us
The IHS financing story is not simply a story about whether the
federal budget is large or small. It is a story about how a
distinctive federal health system allocates resources across
direct care, purchased care, facilities, public health, and
other functions.
It is also a story about what happens when those resources are
compared with the population served and the care that population
requires.
Questions to Keep in Mind
- What does an IHS appropriation actually finance?
- How should direct care and PRC be distinguished?
- Which population should be used when measuring spending per person?
- What is the difference between a budget and an estimate of need?
- How do Medicaid and Medicare change the financing picture?
- What evidence would demonstrate that available resources are adequate?
Where the Course Goes Next
The next segment follows one of the most important financing
streams outside the IHS appropriation: Medicaid.
We will examine enrollment, reimbursement, and why Medicaid has
become such an important part of Indian health financing.
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Edward J. Fox, PhD 