AI-generated educational paper · November 2026 · For Tribal leaders, health program managers, and policy analysts.
1. The basic idea
Contract Support Costs (CSC) are additional funds that the Indian Health Service (IHS) is required to provide, when eligible, to Tribal Nations and Tribal organizations operating programs under the Indian Self-Determination and Education Assistance Act (ISDEAA, often called Public Law 93-638). CSC recognizes that administering a federal program through a Tribal contract or compact can create necessary costs not fully covered by the funds that would otherwise have been spent by IHS to operate the program itself.
The policy objective is straightforward: a Tribe should not have to reduce the health services it delivers simply to pay eligible administrative and support costs associated with carrying out a federal program. CSC is part of the federal commitment to meaningful Tribal self-determination—not a bonus or a general-purpose grant.
2. What costs are covered?
The law distinguishes between the funding for the transferred program (sometimes called the Secretarial amount) and eligible contract support costs. CSC commonly includes reasonable, allowable costs for activities such as accounting, audits, payroll, personnel administration, insurance, procurement, and contract management when those costs meet statutory requirements and are not already paid through the transferred program funding.
CSC may include indirect costs allocated across programs and eligible direct support costs. The statute also addresses certain startup and pre-award costs. Eligibility and amounts depend on the contract or compact, applicable cost principles, negotiated indirect cost rates, and whether a cost is already included elsewhere. Not every administrative expense qualifies, and the same expense cannot properly be paid twice.
3. A simplified clinic example
Suppose a Tribe receives $5 million to operate an IHS-funded health program. It also incurs $600,000 in additional eligible support costs that are not already covered by the program amount. If the full $600,000 qualifies as CSC, the combined funding would be $5.6 million. Without adequate CSC, the Tribe might have to divert resources intended for care to meet those obligations. These figures are illustrative; they are not a formula for calculating any Tribe’s entitlement.
4. Why this became a major legal issue
For many years, disputes arose when IHS did not pay the full eligible CSC amounts claimed under Tribal contracts. The Supreme Court’s decision in Salazar v. Ramah Navajo Chapter (2012) held that the government could not avoid payment obligations under binding contracts merely because the total appropriation for CSC was insufficient, where legally available appropriated funds remained.
In Becerra v. San Carlos Apache Tribe (2024), the Supreme Court held that eligible CSC may include costs of collecting and spending program income generated by the contracted health program, including revenue from Medicare, Medicaid, and private insurance. This is especially important for health programs with substantial third-party collections. It does not mean that every cost associated with that revenue automatically qualifies.
5. CSC in the federal IHS budget
Since FY 2016, Congress has generally provided IHS CSC funding through an indefinite appropriation, allowing eligible contract obligations to be met rather than relying on a single fixed dollar ceiling. Annual budget presentations nevertheless report CSC spending and estimates, and those figures must be interpreted carefully.
An increase in CSC funding can reflect additional eligible obligations, higher administrative costs, changes in indirect cost rates, more programs under Tribal operation, or the treatment of third-party revenue-related costs. It should not automatically be described as an equivalent increase in clinical services or expanded patient capacity.
6. What CSC is—and is not
| Funding category | Primary purpose |
|---|---|
| Contract Support Costs | Eligible additional costs of carrying out ISDEAA contracts and compacts. |
| Health Services program funds | Program operations and services supported by the transferred IHS funding. |
| Purchased/Referred Care (PRC) | Authorized health care purchased from outside providers. |
| Section 105(l) leases | Eligible lease compensation for facilities used to carry out ISDEAA programs. |
These categories can interact in practice, but they have different legal bases and should not be combined when evaluating changes in resources for direct patient care.
7. Questions Tribal analysts should ask
- What portion of the program’s administrative and support costs is already funded in the transferred program amount, and what portion is eligible for CSC?
- Are the indirect cost rate, direct CSC calculations, and treatment of third-party revenue documented and current?
- Does a reported CSC increase represent a new service opportunity, an existing legal obligation, or rising costs of operating the program?
- When comparing IHS budgets across years, are CSC, PRC, facilities, and Section 105(l) lease obligations reported separately and consistently?
8. CSC and indirect costs: related, but not identical
Indirect costs describe how shared expenses—such as central accounting, human resources, and organization-wide audits—are allocated among programs. An approved indirect cost rate is one common method for calculating those expenses. CSC, by contrast, is a statutory funding obligation under ISDEAA. It can include eligible indirect costs and additional eligible direct costs not already covered by the funding transferred to operate the program.
An indirect cost rate does not, by itself, determine the CSC entitlement. The calculation must account for the applicable cost base, expenses already funded in the Secretarial amount, eligible direct CSC, and rules against duplicate payment. For example, if a $4 million eligible base produces $800,000 in calculated indirect costs, and $100,000 is already funded, illustrative indirect CSC would be $700,000. If another $150,000 in direct CSC is eligible, total CSC would be $850,000. These figures are illustrative, not an IHS formula or determination.
Key distinction: Indirect costs describe how an expense is allocated; Contract Support Costs describe a federal statutory funding obligation. The two overlap, but are not interchangeable.
9. The larger policy lesson
CSC illustrates a central tension in federal Indian health financing: Tribal self-determination requires both authority to operate programs and sufficient funding to carry out that responsibility. Paying CSC is necessary to honor the federal obligation, but CSC growth can, in practice, free resources for patient care by paying eligible administrative and support costs that Tribal health programs might otherwise have had to cover with their program funds. This is an important practical benefit of fulfilling CSC obligations. The amount actually redirected to patient care, however, depends on each program’s funding arrangements and spending decisions; CSC appropriations alone do not quantify that benefit. A sound budget analysis should examine those outcomes separately.
Selected legal and policy references
- Indian Self-Determination and Education Assistance Act, 25 U.S.C. §§ 5325(a)(2)–(3) and 5388 (as applicable to contracts and compacts).
- Salazar v. Ramah Navajo Chapter, 567 U.S. 182 (2012).
- Becerra v. San Carlos Apache Tribe, 602 U.S. 222 (2024).
- IHS, Contract Support Costs guidance and annual Congressional Justifications (consult the applicable fiscal year for current appropriations and estimates).
AI-generated educational overview. Specific CSC claims and calculations require review of the governing agreement, current IHS guidance, and applicable legal requirements.