John G. Roberts, Jr.: We'll hear argument first this morning in Case 23-250, Becerra versus the Apache Tribe.
John G. Roberts, Jr.: Ms. Flynn.
Caroline A. Flynn: Mr. Chief Justice, and may it please the Court: The Indian Self-Determination Act requires the Indian Health Service to enter into contracts with tribes to transfer federal health programs that IHS previously carried out for the tribes' benefit.
Caroline A. Flynn: ISDA's basic design is simple. IHS takes the appropriated funds it would have otherwise spent on the federal program and transfers those funds to the tribe in exchange for the tribe's promise to use them to provide the same level of services, and ISDA obligates IHS to add to that core secretarial amount contract support costs to plug specific gaps the secretarial amount does not cover.
Caroline A. Flynn: What the tribes are arguing here is that ISDA also obligates IHS to subsidize the tribes' expenditures of funds that they don't receive from IHS under the contract but, rather, collect from third parties as supplemental revenue.
Caroline A. Flynn: The statutory text and context refute that theory, which would upend how the statute has been administered for 35 years.
Caroline A. Flynn: ISDA's provisions addressing contract support costs say nothing about third-party revenue a tribe may earn.
Caroline A. Flynn: ISDA deals with that separate income stream in other provisions, including one instructing that such income shall be treated as supplemental funding to that in the contract.
Caroline A. Flynn: The tribes' argument that Congress actually intended for such income to determine what IHS pays under the contract would work a sea change in ISDA's scheme by potentially tripling the federal government's contract support cost obligation and eventually transforming what the statute designates as mere support costs into the primary component of contract funding.
Caroline A. Flynn: But there is an even more straightforward reason why the tribes' theory here is wrong.
Caroline A. Flynn: It violates Congress's express command that IHS only reimburse costs that are directly attributable to the tribes' ISDA contract.
Caroline A. Flynn: That prohibition applies notwithstanding any other provision of law and would independently bar the agency from paying the costs at issue here even if they might otherwise qualify.
Caroline A. Flynn: I welcome the Court's questions.
Clarence Thomas: Are there limitations on how the tribe can use the outside income --
Caroline A. Flynn: There are two --
Clarence Thomas: -- the additional income?
Caroline A. Flynn: -- there are two statutory conditions that are applicable to how tribes can use the --this third-party reimbursement income.
Caroline A. Flynn: Those are in 5325(m)(1).
Caroline A. Flynn: That's a provision --
Clarence Thomas: And what's that limitation?
Caroline A. Flynn: So, there, it says they have to use it to further the general purposes of the contract.
Caroline A. Flynn: And --
Clarence Thomas: Well, if that's the case, I guess their argument is then it is a part of the contract?
Caroline A. Flynn: They have an argument that because all of ISDA 20 -- Title I is incorporated via a cross-reference in the authority section of the model contract, that that provision, (m)(1), is incorporated.
Caroline A. Flynn: But that provision also has to be read consistent with the provision of the Indian Health Care Improvement Act.
Caroline A. Flynn: That's 1641(d)(2).
Caroline A. Flynn: And that governs the same reimbursement income and says tribes just have to use it "for any healthcare -related purpose" or otherwise defer to the purposes of that law, which include things as varied as including the presence of tribal members in healthcare professions.
Caroline A. Flynn: So it is a very open -ended limitation that is not limited to just providing additional contract services.
Sonia Sotomayor: I'm sorry, but --
John G. Roberts, Jr.: Well, under -- under your approach, a tribe is worse off if -- the more they undertake in -- in the direction of self-determination, right?
Caroline A. Flynn: I would --
John G. Roberts, Jr.: In terms --in terms of funding, they are undertaking more healthcare responsibilities and getting a smaller percentage of the money back from the government.
Caroline A. Flynn: I would respectfully disagree with that, Your Honor.
Caroline A. Flynn: I believe you're referencing the -- the mathematical hypo that the tribes have offered in their brief saying that there is what they call a self-determination penalty because --
John G. Roberts, Jr.: Right.
Caroline A. Flynn: --for the same amount of third-party reimbursement income HHS brings in, the tribe won't be able to provide the same level of services.
Caroline A. Flynn: But that assumes that HHS, when it's -- or IHS, when it's running its own program, and the tribes are earning the same amount of third-party income. And there are ways that statute has -- or that Congress has built flexibilities into the statute to enable tribes to earn more third-party reimbursement income in the first instance and have greater flexibility to spend it so as to leverage it to build their programs in ways that IHS cannot. And so you don't -- there is --
John G. Roberts, Jr.: Well, how is that? I mean, they're getting more Medicare, Medicaid asset -- or financing that they can then use, but the -- under the interpretation of the government, they're not reimbursed for that.
Caroline A. Flynn: Well, they're earning more in the first instance, for instance, because tribes running their own programs can unilaterally decide to serve non-Indians and other noneligible beneficiaries.
Caroline A. Flynn: IHS --
Elena Kagan: But what about the tribes that don't want to do that? I mean, I think you said that maybe half the tribes s erve non-Indians, but the other half don't and, presumably, have decided that they don't want to.
Elena Kagan: And then the Chief Justice's question would apply in full force.
Elena Kagan: They're getting less because they've gone the independent route.
Caroline A. Flynn: Well, I -- I think that Congress gave them that flexibility so that they could grow their programs that way, but the other ways in which IHS is differently situated is that IHS can't use Medicaid and Medicare proceeds, which are the bulk of the proceeds that we're talking about, to spend on new construction of new facilities.
Caroline A. Flynn: Tribes can.
Caroline A. Flynn: That can enable the tribes to grow their programs and bring in more third-party income. And there's -- the other distinction is that because tribes are able to use their income on any healthcare-related purpose, whereas IHS is subject to a first use requirement where they have to specifically reinvest that money in Medicaid and Medicare program compliance, there's also just a limitation on how IHS can build the program, even aside from the decision to serve --
Elena Kagan: Well, is that really
Caroline A. Flynn: -- non-beneficiaries.
Elena Kagan: -- so different? I mean, presumably, the tribes also have to make sure they're compliant with Medicare and Medicaid, so, presumably, they're having to put money into the same things.
Caroline A. Flynn: So I believe Congress thought it was a difference when they deliberately exempted the tribes from that requirement and said that they can prioritize other uses of these funds, including program expansion, rather than having to ensure complete compliance with Medicaid and Medicare in the first instance.
Elena Kagan: Well, I mean --
Caroline A. Flynn: But I would --
Elena Kagan: -- they have to make sure that the Medicare and the Medicaid monies keep flowing in, and for them to -- for those monies to keep flowing in, they have to be compliant with the program terms.
Caroline A. Flynn: Right, but they have a sort of accounting and prioritization flexibility that IHS does not have.
Caroline A. Flynn: But the other thing is -- I would say about all this is this is -- we're talking now about the tribes' argument that there is some kind of a contractual condition having to do with spending the money that shows that Congress would have wanted this to be considered -- to help determine contract support costs, but I think, when you look at the contract support cost provisions themselves, they tie the obligation to pay these costs to the federal program that is the subject of the contract. And the federal program that is the subject of the contract is the program that the tribes agreed to carry out in exchange for the secretarial amount to the same extent as those -- that secretarial amount funding will allow them to perform.
Neil Gorsuch: Counsel --
Caroline A. Flynn: And --
Neil Gorsuch: -- I had thought that a lot changed after 2010 and the tribes became payor of last resort and -- under Obamacare, and --and so they've taken on a lot more obligations here.
Neil Gorsuch: Is that right?
Caroline A. Flynn: The payor of last resort provision means that when there are different available sources of funds, that the tribes or the IHS program is --
Neil Gorsuch: Is the payor of last resort?
Caroline A. Flynn: -- among the available sources of funds.
Caroline A. Flynn: We don't interpret that provision to require tribes to enroll in --
Neil Gorsuch: No, but --
Caroline A. Flynn: -- Medicare and Medicaid, for instance.
Neil Gorsuch: -- the ones that have, it's -- it's -- it's -- it's -- that's what's changed.
Neil Gorsuch: That's why we're here, I think, in part.
Neil Gorsuch: And so they have to collect -- and they have to collect from Medicare and Medicaid, right? That's that --
Caroline A. Flynn: Again, I don't think that provision requires them to enroll in --
Neil Gorsuch: No, but, once -- once they -- once they take on this obligation, they have -- they have a duty to collect the funds from third parties?
Caroline A. Flynn: We have not disputed that reading of the payor of last resort provision in this case.
Neil Gorsuch: Okay.
Caroline A. Flynn: But I'm not sure that IHS
Neil Gorsuch: Okay.
Neil Gorsuch: So they have -- they have to collect it, and then the question is how they spend it.
Neil Gorsuch: And -- and (m)(1) says it has to be consistent with the general purposes of the contract.
Neil Gorsuch: You indicated that.
Neil Gorsuch: And the contracts are specific about what services they provide.
Neil Gorsuch: EMS in some cases, other kinds of particular services, right?
Caroline A. Flynn: Yes.
Neil Gorsuch: So the general purpose of the contract is Indian health, right?
Caroline A. Flynn: Yes, I agree with that.
Neil Gorsuch: And Indian health, right?
Caroline A. Flynn: Yes.
Neil Gorsuch: Not --not -- not -- not non-Indians?
Caroline A. Flynn: Yes.
Neil Gorsuch: Okay.
Neil Gorsuch: And -- and it's even more specifically limited by the particular services that tribes have contracted to provide, like, for example, in one of the cases, EMS services, right?
Caroline A. Flynn: I agree with that, but the services --
Neil Gorsuch: So --
Caroline A. Flynn: -- that the tribe is -- I just --
Neil Gorsuch: So, if you do agree with that, then what's the problem here? You raised the specter that they're going to expand their programs to help non -Indians.
Neil Gorsuch: Maybe they're free to do that -- you're right -- statutorily.
Neil Gorsuch: But, in terms of the contract support services that would be required to be paid from the govern ment, it would seem to be limited, A, as you agreed, by the general purpose of the contract, which is Indian health, not non-Indian health, and, two, more specifically, by the specific services that the government has contracted to allow the tribes to provide --
Caroline A. Flynn: I --I don't under --
Neil Gorsuch: -- particular services.
Caroline A. Flynn: I don't understand that to be the tribes' position in this case, is that the extra contract support costs they're asking for be limited to that tied to reimbursement income that came from serving only --
Neil Gorsuch: Why isn't that -- it has to be consistent with the general purposes of the contract, (m)(1).
Neil Gorsuch: So those --those purposes are the specific services that have been provided -- contracted to be provided.
Caroline A. Flynn: So I -- I would not fight Your Honor on imposing that limitation if you were to say that there is some additional contract support cost obligation tied to third-party reimbursement.
Neil Gorsuch: Okay.
Neil Gorsuch: So would that -- would that --
Caroline A. Flynn: I'm talking about the --
Neil Gorsuch: -- would that take care of all the government's concerns about and -- and -- and the parade of horribles about the money being used for non-Indian healthcare? Because it would seem to.
Caroline A. Flynn: Well, again, that wasn't what the lower court found here, and I don't believe that's what the tribes are arguing, but, I mean, I think we would still have a situation where, because third-party reimbursement income has been increasing and because that would then directly, according to the tribes' theory, determine how much contract support cost the agency is paying and that amount would grow and snowball over time, it would overtake the secretarial amount of the primary --
Neil Gorsuch: Well, it certainly has grown over time, but that's a function, again, of them becoming payors of last resort the way IHS sometimes is.
Neil Gorsuch: And -- and that is a big change.
Neil Gorsuch: I grant you that.
Neil Gorsuch: But I think you just agreed that properly read, (m)(1) would limit it to Indian healthcare and the particular services the government has contracted for the tribes to supply.
Caroline A. Flynn: So I would agree that the -- the estimate we've provided about how, if the tribes' theory were adopted or imposed on the program nationwide, that would amount to about 800 million to $2 billion per year.
Caroline A. Flynn: That would be different, I assume, if the --
Neil Gorsuch: It would be a lot smaller under what I've just described, wouldn't it?
Caroline A. Flynn: It would be smaller.
Caroline A. Flynn: I don't have the information to tell you how much.
Brett M. Kavanaugh: Is that --is that issue -- is that issue before us?
Caroline A. Flynn: That wasn't what the lower courts decided here.
Caroline A. Flynn: I don't take the tribes to be excluding reimbursement revenue from non-Indian beneficiaries from the kind of contract support costs they're asking for, and so I --I, you know, would be open to this Court to --
Elena Kagan: I had thought --
Caroline A. Flynn: -- rule that way, but --
Elena Kagan: -- that -- maybe I'm wrong, but -- Mr. Unikowsky can say so, but I had thought that one of Mr. Unikowsky's arguments sounded in this vein, that -- you know, that to the extent that the government was saying, oh, there are all these possible abuses out there in the world, that there was a ready solution, which was to limit it to the services that the tribe is providing to Indians under the contract.
Caroline A. Flynn: To -- just to clarify, we don't think it's an abuse to, you know, take advantage of the flexibilities that Congress has allowed to decide to serve non -beneficiaries if it will not diminish the care available to eligible Indians.
Caroline A. Flynn: But --
Elena Kagan: I'll take that as a friendly amendment.
Caroline A. Flynn: But I understood my friend representing the Northern Arapaho to say that if the tribe actually does spend third-party reimbursement income on program services, that that should lead to a different result.
Caroline A. Flynn: I don't think that solves the -- the problem for his argument there, but I didn't take him to be saying that you limit the kind of third-party reimbursement income to just that provided to Indians.
Caroline A. Flynn: That is not something I have seen raised in this case.
Brett M. Kavanaugh: That's not raised at all --
Caroline A. Flynn: But perhaps they can clarify.
Brett M. Kavanaugh: -- is it? I mean, that's just not raised at all?
Caroline A. Flynn: No, I don't think so.
Brett M. Kavanaugh: I --I didn't -- I didn't see it at least.
Caroline A. Flynn: No, I don't think so.
Amy Coney Barrett: Counsel --
Sonia Sotomayor: Counsel -- I'm sorry.
Amy Coney Barrett: Go ahead.
Sonia Sotomayor: Counsel, you've been talking about this costing a lot.
Sonia Sotomayor: It may well be.
Sonia Sotomayor: And -- and I'm interested in the other side's response to the series of questions that are going on now about that limitation.
Sonia Sotomayor: But I understand that in terms of tribal healthcare, it's about one -third of what is spent by the average American on their own healthcare.
Sonia Sotomayor: So it's not as if al l of this money is bringing us a luxury healthcare spa.
Sonia Sotomayor: It's actually bringing us to a fairly minimal level of healthcare for tribal members.
Sonia Sotomayor: I still don't understand how your interpretation makes any contract support system costs, or many of them, recoverable at all because you seem to be saying that if you're providing services with a -- you have services with a third party like Medicare or Medicaid, why would that then include contracts with a consultant who comes in to do the other services that the contract requires for the government? There's always third -party contract -- contract supports that are reimbursed by the government.
Sonia Sotomayor: Why is this any different? They're not providing the service because of Medicaid or Medicare.
Sonia Sotomayor: They're providing the service because of their agreement with the government.
Sonia Sotomayor: This is only a reimbursement.
Sonia Sotomayor: It's not a required service agreement.
Caroline A. Flynn: So I do want to make sure to respond to the point that Your Honor raised in the beginning of your question about the underfunding of Indian health, and IHS, you know, agrees with that and is seeking additional appropriations from Congress but just doesn't believe that upending the funding scheme in this way, in an open-ended way, is what --
Sonia Sotomayor: That -- that assumes the answer to the question, which is that it's upending, if it's clear by the text that if you provide services, you'll be reimbursed for them and for contract support. It's the contract doing that, not -- not upending it.
Caroline A. Flynn: Yes, but I -- to respond to Your Honor's question about 5326 and the two prohibitions the re, so you were, I believe, referencing the second prohibition, which is that IHS funds cannot be spent to pay costs associated with any contract that's not with IHS.
Caroline A. Flynn: We understand that prohibition to be limited to contracts by which the tribe receives funds, which is consistent with Congress's -- what we understand to be Congress's motivation to not have IHS's appropriated funds be used to subsidize other funding schemes.
Caroline A. Flynn: But, even if you disagree with me about that, I would point you to the first prohibition in 5326.
Caroline A. Flynn: That is the one saying that IHS's appropriated funds cannot be used to spend on --to reimburse costs that are not directly attributable to ISDA contracts.
Caroline A. Flynn: And we think that that language squarely applies here because attributable is asking for a causation
Sonia Sotomayor: The contract requires them to seek reimbursement.
Sonia Sotomayor: How can it not be attributable? As Justice Gorsuch pointed out, before, they didn't have to do it.
Sonia Sotomayor: Now they're forced to do it by contract.
Caroline A. Flynn: Because we think attributable is calling for --I mean, the word means capable of being produced by or brought about by or caused by.
Caroline A. Flynn: And then you add directly, which is an adverb that doesn't appear the other times that ISDA -- the three other times that ISDA uses the word "attributable." And that is --
Sonia Sotomayor: Okay.
Caroline A. Flynn: --there's an extended --
Sonia Sotomayor: Thank you, counsel.
Amy Coney Barrett: Counsel, can I -- I -- I -- this is a complicated statute and so I have a question about how it actually works.
Amy Coney Barrett: It seems to me there's an argument that these costs should be included in the secretarial amount.
Amy Coney Barrett: Am I right that you don't dispute that the costs of collecting the Medicare and Medicaid fall within the secretarial amount?
Caroline A. Flynn: That's correct.
Amy Coney Barrett: Okay.
Amy Coney Barrett: When IHS collects the money, does IHS then spend it?
Caroline A. Flynn: Yes.
Caroline A. Flynn: It has to first dedicate it to the facility that earned its compliance with Medicaid and Medicare, but yes.
Amy Coney Barrett: Right.
Amy Coney Barrett: So, if the tribe is standing in IHS's shoes, why shouldn't the secretarial amount -- I -- I don't understand the tribes -- and Mr. Unikowsky can address this point -- I don't understand the tribes to be saying it should be part of the secretarial amount, but if the secretarial amount includes the costs of collection, it's not apparent to me why it wouldn't cover the costs of expenditure in the same way that you'r e saying IHS spends that money.
Caroline A. Flynn: Because the -- well, there are some --I'm not sure this is Your Honor's question.
Caroline A. Flynn: There are some overhead administrative functions that are included in the secretarial amount if they're the kind of thing that the Secretary could have allocated to that tribe.
Caroline A. Flynn: But, no, the cos ts of spending income from third parties is not part of the secretarial amount because that is limited to the funds the Secretary otherwise would have provided for the operation of the -- the operation of the program.
Caroline A. Flynn: And then the contract support cost obligation is itself tied as funds to support that amount.
Amy Coney Barrett: Except my confusion is you're saying that the secretarial amount does include the costs of collecting the third-party income, right?
Caroline A. Flynn: Yes, because -- yeah.
Amy Coney Barrett: Yeah.
Amy Coney Barrett: And you -- you incur overhead costs when you spend that third-party income as well, which I take to be the entire dispute here, is whether they get coverage for that, right?
Caroline A. Flynn: Right, but I guess I would say the -- the costs of collection and billing, that is associated with providing the services using the secretarial amount itself.
Caroline A. Flynn: These later costs of deciding how to spend those funds, which may not even be --happen during the same contract period, that is not tied up with the services being provided in the first instance.
Caroline A. Flynn: So the billing function, we think, comes over with the secretarial amount because it's tied up with providing the services and getting the funds in --in return but not with the later decisions about how to spend this money, which could be spent on building a new facility, starting a new kind of healthcare program the Secretary didn't previously run on the tribes' behalf, that kind of thing.
Neil Gorsuch: I think the answer, -- though, if I understood it correctly, to Justice Barrett is that when IHS does collect third-party payments, it spends that money to advance Indian health, and that includes some overhead costs?
Caroline A. Flynn: Yes, that is correct.
Caroline A. Flynn: But what the statute is telling us to look to for purposes of deciding what counts for contract support cost reimbursement is a federal program
Neil Gorsuch: No, I -- I understand.
Neil Gorsuch: My question was IHS.
Neil Gorsuch: And so, when IHS spends that money, it incurs some overhead costs, and those are obviously paid for by the federal government.
Caroline A. Flynn: Yes.
Neil Gorsuch: Okay.
Caroline A. Flynn: But the -- the statute is telling --
Neil Gorsuch: And then -- and then -- and then -- and then just back to where we were earlier, you said that Mr. Unikowsky didn't raise an argument.
Neil Gorsuch: I've got page 27 of the brief in front of me. "At a minimum, contract support costs are recoverable when program income is used to fund enumerated services within the contractual scope of work." And he says on page 29 that the Northern Arapaho are prepared to prove that every penny of program income was, in fact, spent for activities enumerated in the contractual scope of work.
Caroline A. Flynn: So I don't understand that to be an argument along the lines Your Honor was suggesting about --
Neil Gorsuch: Why not? My argument was --my question was, aren't they obliged under (m)(1) to spend on general purposes, that's Indian health, and aren't they also obligated to spend in accordance with the contractual services that they've agreed to provide with --for the government?
Caroline A. Flynn: So I --
Neil Gorsuch: That is exactly what's laid out in those pages.
Caroline A. Flynn: I don't think they're distinguishing between serving eligible Indian beneficiaries and those that the tribe is eligible to serve once they make a determination that they can. But the other thing is I believe for at least one of the contract years at issue -- we only have one set of contracts with the Northern Arapaho -- in there, they refer to the resolution that the tribe made to serve non-beneficiaries and talk about that in the course of, I think, the scope of work or something like that.
Caroline A. Flynn: So I -- that's why I didn't understand that to be an argument about distinguishing between those two different kinds of reimbursement schemes, but, of course, they can
Brett M. Kavanaugh: Can -- can you --
Caroline A. Flynn: --clarify that.
Brett M. Kavanaugh: -- can you finish your answer to the first question that Justice Gorsuch just asked?
Caroline A. Flynn: Yes.
Caroline A. Flynn: So I took Justice Gorsuch to be saying that shouldn't -- or perhaps to be suggesting that shouldn't we think of the federal program as that funded by the secretarial amount, the appropriated funds, but also third -party income because that's what IHS would do when running these programs itself. And I was pointing to the statutory phrase, "the federal program that is the subject of the contract." And that's in 5325(a)(3)(i).
Caroline A. Flynn: And the program that is the subject of the contract is the program that the tribe is agreeing to undertake in exchange for the secretarial amount, and you know that from model contract language that appears in the contract.
Caroline A. Flynn: For instance, in the Northern Arapaho -- or in the San Carlos Apache Tribe's contract, it's at JA 54, where it says, "The contractor shall not be obligated to continue performance that requires an expenditure of funds in excess of the amount of funds awarded under this contract." So that is tethering the obligation to perform to the secretarial amount.
Caroline A. Flynn: There's also a provision which also comes from the model contract language that's enacted into the statute, and in the San Carlos Apache Tribe's contract at JA 51, it says, "The purpose of the contract is to transfer the funding and the following related functions, services, programs, and activities." So we think the subject of the contract language in the contract support cost provision, which the next sub-clause which also refers to the federal program, we think, is referring back up to, is the program that is delineated by the secretarial amount, the one that the contractor is promising to undertake in exchange for the secretarial amount, and not parts -- services funded by other funding streams.
Ketanji Brown Jackson: How do you square that view and that interpretation with the rule of construction that the statute gives us, which says --I'm looking at 532 -- 5321(g) --that each provision shall be liberally construed for the benefit of the Indian tribe participating in self-determination? So to the extent -- I don't know whether we need to think of this as ambiguous or not, but they make an argument about what those same provisions mean.
Ketanji Brown Jackson: Why aren't we bound by this statutory mandate to construe them in their favor?
Caroline A. Flynn: Because we believe that statutory language is calling for courts to apply the Indian canon, the common law Indian canon that has been applied in this Court's cases.
Caroline A. Flynn: And as that Court --
Ketanji Brown Jackson: It doesn't say that. It doesn't reference the -- can Congress not come up with its own liberal construction provision?
Caroline A. Flynn: It could, but it used the same buzzwords that come from this Court's articulation of that canon, which is "liberally construed" and "ambiguities resolved to the benefit of the Indians." That comes from how this Court has phrased the canon in its cases like Chickasaw, Montana Blackfeet.
Caroline A. Flynn: So I think, if Congress was asking for something different, it wouldn't have used the exact same phrasing that calls up the common law canon and all of its roots.
Caroline A. Flynn: And those roots include --
John G. Roberts, Jr.: You can finish your answer.
Caroline A. Flynn: Thank you.
Caroline A. Flynn: Those roots include looking at context, they include looking at statutory structure, they include thinking about things like common sense.
Caroline A. Flynn: And we've laid out some examples in our reply brief.
Sonia Sotomayor: I'm sorry --
John G. Roberts, Jr.: Thank you -- thank you, counsel.
John G. Roberts, Jr.: Justice Thomas, anything further? Justice Alito? Justice Sotomayor?
Sonia Sotomayor: Just to be clear on that last point --
Caroline A. Flynn: Mm-hmm.
Sonia Sotomayor: -- I know some of my colleagues believe that we shouldn't be making choices of who to favor in interpretive principles.
Sonia Sotomayor: But it's not us making that choice; it's the statute making that choice, correct?
Caroline A. Flynn: Yes.
Caroline A. Flynn: The statute calls for the application of the Indian canon.
Sonia Sotomayor: All right.
Sonia Sotomayor: So, if there is an ambiguity, it should be -- we should follow the dictates of the choice specified by Congress, correct? You think there's none, but if we believe there is?
Caroline A. Flynn: Yes, but I believe you can
Sonia Sotomayor: All right.
Sonia Sotomayor: Thank you, counsel.
John G. Roberts, Jr.: Justice Gorsuch? Justice Kavanaugh?
Brett M. Kavanaugh: Can you just, on the funding amount, 800 million to 2 billion, put that in context here? Because, you know, that number's not contextualized.
Caroline A. Flynn: Sure.
Caroline A. Flynn: So IHS's current contract support cost obligation is about 1 billion per year.
Caroline A. Flynn: Its total funding is 8 billion per year.
Caroline A. Flynn: And because contract support costs are discretionary funding, it falls under discretionary funding caps government-wide but also applicable to this committee.
Caroline A. Flynn: And so it stands to reason that if all of a sudden contract support costs just explode, Congress is going to have to find the cuts elsewhere to keep the budget under the discretionary spending caps.
Caroline A. Flynn: And we believe there's a real danger that that funding is going to come from the other 40 percent of IHS's budget, which is providing direct services to tribes that decide not to enter into these contracts in contexts --
Brett M. Kavanaugh: Because Congress couldn't cut, without changing its rules, mandatory spending, correct, so it would have to come out of the other discretionary funding?
Caroline A. Flynn: That's what the cap applies to, yes.
Caroline A. Flynn: And, you know, IHS has asked for this funding to be transferred to mandatory funding.
Caroline A. Flynn: It's asked for years.
Caroline A. Flynn: Congress has not done that.
Caroline A. Flynn: And so --
Brett M. Kavanaugh: When you say "this funding," which funding?
Caroline A. Flynn: Both just CSC or Contract Support Costs in particular and also all of IHS's income.
Brett M. Kavanaugh: But, right now, it's still discretionary?
Caroline A. Flynn: Right now, it is still discretionary.
Brett M. Kavanaugh: So subject to the cap, okay.
Caroline A. Flynn: Yes.
Brett M. Kavanaugh: And that would -- okay.
Brett M. Kavanaugh: I understand that.
Brett M. Kavanaugh: On the 35 years point, Justice Gorsuch -- I'm just interested in your further response to things changed in 2010 after the Health Care Act was passed in 2010.
Brett M. Kavanaugh: What was your full response to that? Do you see tha t as causing the change that prompted this issue, or where -- where else do you see it coming from, other than the overall underfunding problem that Justice Sotomayor raised?
Caroline A. Flynn: So I don't understand -- Congress in the Affordable Care Act enacted this payor of last resort provision, but it's not part of ISDA, it's not part of the Indian Health Care Improvement Act, and so I don't -- I don't understand Congress to have wanted to affect a sea change to ISDA funding by way of that provision.
Caroline A. Flynn: I'm not aware of anything in the legislative background suggesting that that was the case.
Caroline A. Flynn: I would also say that I understood the tribes to be saying that there were changes made in 1994 that actually affected this change. They think that's by the addition of (m) and also the f act that the model contract now has the authority section that cross-references all of Title I.
Caroline A. Flynn: I think that would be a very sort of triple bank shot way of getting across this meaning when Congress was otherwise addressing the relationship between contract funding and the receipt of third-party income. But also, if that is what Congress tried to accomplish in 1994, nobody noticed for decades.
Caroline A. Flynn: IHS has been administering this program the way we've been advocating for in this case since that time.
Brett M. Kavanaugh: Has anyone in Congress raised concerns about that that you're aware of?
Caroline A. Flynn: I'm not aware of this contract support cost dispute vis --vis third-party reimbursement income coming up in the background of these laws.
Caroline A. Flynn: I'm not aware of it ever being raised to the surface.
Brett M. Kavanaugh: Thank you.
John G. Roberts, Jr.: Justice Barrett?
Amy Coney Barrett: So the questions that I was asking you before really related to -- 5325(a)(1) and kind of asking you why this wouldn't have been included in the secretarial amount.
Caroline A. Flynn: Mm-hmm.
Amy Coney Barrett: Just want to clarify something about 5325(a)(2). So, as I understand it, (a)(2)(A), I mean, the example that kept coming up in the briefs was workers' comp.
Caroline A. Flynn: Mm-hmm.
Amy Coney Barrett: And (a)(2)(B), the example would be legal services from DOJ, you know, something that IHS doesn't have to provide for itself or hire lawyers for itself because it has government lawyers outside the agency that it can rely on, correct?
Caroline A. Flynn: Yes.
Amy Coney Barrett: Yes, okay.
Amy Coney Barrett: So, in arguing that these cannot count as contract support costs, does your argument really hinge on the definition of "the program" in (a)(2)(A)? Because it seems like these would not be expenses or -- or I -- I took some of your answers in your brief -- your answers today and your brief to be saying that these are expenses that the Secretary wouldn't normally incur in spending the money because the Secretary has constraints in the way it can spend third-party income that do not apply to the tribe.
Amy Coney Barrett: Do I have that right?
Caroline A. Flynn: Yes.
Amy Coney Barrett: Okay.
Amy Coney Barrett: So why couldn't these then be contract support costs under 5325(a)(2)? Because they are not costs that are normally -- and I want you to ignore your argument about the threshold 5325(a)(2) for this point and just look at 5325(a)(2)(A).
Amy Coney Barrett: Why can't they count as costs that the Secretary does not incur but the tribes do? Is your argument just because they're not incurred in operation of the program?
Caroline A. Flynn: Yes, that's correct.
Caroline A. Flynn: But, if I take Your Honor to be saying that these would qualify under (a)(2)(B) --
Amy Coney Barrett: No.
Caroline A. Flynn: Or sorry.
Amy Coney Barrett: I'm --I'm asking if they could qualify -- or why can't they qualify under (a)(2)(A).
Caroline A. Flynn: So I think that what (a)(2)(A) is asking about is actually the expenses like the overhead expenses or the expenses like worker comp that comes along with spending, so not with the underlying activity of earning the money in the first instance if --
Amy Coney Barrett: But aren't these costs that tag along with spending, like spending the third-party funds to do whatever it is the tribes choose to do to further the general purposes of the contract?
Caroline A. Flynn: Right, but the same way that these costs tag along with providing the services when you're running the program in the first instance.
Caroline A. Flynn: So what -- the --when we're talking about the expenses, we're saying the expense -- the added workers' compensation expense that comes along with providing a service, and so I take the tribes to be arguing that it's -- if the service is funded one way or another way, that that's why the expense would be eligible for contract support costs if it is part of the federal program that is eligible for funding.
Amy Coney Barrett: And so the most important part for the government's purposes is that you define this to be outside of the program?
Caroline A. Flynn: Yes.
Caroline A. Flynn: I mean, that's part of our argument.
Caroline A. Flynn: We have the other statutory -- yes, yeah, yes.
Amy Coney Barrett: Okay, thanks.
John G. Roberts, Jr.: Justice Jackson?
Ketanji Brown Jackson: And you define it to be out side of the program despite the fact that Section 1623(b) requires for IHS or the tribes to be the payor of last resort?
Caroline A. Flynn: Yes, because -- for the reasons I was saying, the program defined for this funding provision, 23 -- or 5325(a), is the federal program that is the subject of the contract.
Caroline A. Flynn: The payor of last resort provision, again, not part of ISDA, is just speaking to when there are eligible sources of funding, which payor has to pay that.
Caroline A. Flynn: But I'm not sure I see that a s changing the meaning of the federal program that is the subject of the contract or makes the tribe acting -- act as a contractor when it spends third-party reimbursement income.
Ketanji Brown Jackson: All right.
Ketanji Brown Jackson: And if the costs balloon, which seems to be a lot of your concern, you explored with Justice Kavanaugh where the cuts might have to come from, but I'm wondering if there's something that precludes renegotiation of the contracts in light of potential cost escalations of the nature that you're talking about?
Caroline A. Flynn: So I take the tribes to be arguing that we don't have flexibility to change the model contract language that incorporates (m)(1) in the way that they think gives rise to this obligation to pay contract support costs.
Caroline A. Flynn: I'm not sure --
Ketanji Brown Jackson: There's no revisit -- I --I just don't know as a matter of just interest here how -- how these contracts work. There's no opportunity for the government to renegotiate terms?
Caroline A. Flynn: We would have to see what a decision says and figure out if that hinges on particular contract language that's not required to be in the contract, but the --
Ketanji Brown Jackson: What about an amend
Caroline A. Flynn: -- authority section --
Ketanji Brown Jackson: -- what been an amendment from Congress? I mean, you say Congress hasn't -- it isn't clear that Congress has ever really focused on this interpretation. So that's a possibility if there's a big ballooning and a problem that arises from that.
Caroline A. Flynn: Sure.
Caroline A. Flynn: It's always the case that Congress could revisit the statutory scheme and take some action to address this problem, but we just don't think that Congress created this problem in how it set up the -- the funding scheme in the first instance.
Ketanji Brown Jackson: Thank you.
John G. Roberts, Jr.: Thank you, counsel.
John G. Roberts, Jr.: Mr. Unikowsky.
Adam G. Unikowsky: Mr. Chief Justice, and may it please the Court: The Self-Determination Act entitles the tribes to recover the disputed contract support costs in this case.
Adam G. Unikowsky: The bulk of the disputed costs are indirect costs.
Adam G. Unikowsky: Under Section 5325(a)(3)(A)(ii), such costs are recoverable if they're incurred in connection with the operation of the federal program, function, service, or activity pursuant to the contract.
Adam G. Unikowsky: The disputed costs in this case meet that description.
Adam G. Unikowsky: If IHS was running tribal healthcare, it would collect program income and spend it on healthcare services.
Adam G. Unikowsky: In the ISDA contract, IHS transferred to the tribe the responsibility both to collect and to spend the program income on healthcare. So, when the tribe carries out healthcare services using program income, it does so as a means of fulfilling its contractual obligation to further the general purposes of the contract. So it's acting pursuant to the contract. And a similar analysis applies to the smaller amount of direct contract support costs sought by Northern Arapaho under Section 5325(a)(3)(A)(i).
Adam G. Unikowsky: Section 5326 is no barrier for the tribes' recovery of costs in this case.
Adam G. Unikowsky: The costs are directly attributable to the contract because they arise from the tribes' work pursuant to that contract, and they're not associated with any third-party Medicare or Medicaid provider agreements because the costs have nothing to do with the work under those agreements.
Adam G. Unikowsky: Finally, ruling in the tribes' favor would further the purposes of the ISDA by promoting tribal self-determination and ensuring that adequate resources are available for healthcare in chronically underserved communities.
Adam G. Unikowsky: I welcome the Court's questions.
Clarence Thomas: Mr. Unikowsky, what do you do with -- you went directly to (a)(3)(A).
Clarence Thomas: What do you do with (a)(2)?
Adam G. Unikowsky: So, Your Honor, we don't think we need to independently satisfy (a)(2).
Adam G. Unikowsky: But, if you don't agree with me on that, we do --
Clarence Thomas: So you think it's just surplusage?
Adam G. Unikowsky: No, it's not surplusage, Your Honor.
Adam G. Unikowsky: So I think that the sequence --I want to make clear I think we do satisfy it, bu t I just want to, as our first-line argument, in 1988, Congress enacted (a)(2), and there's lots of disputes after that over what was covered, what wasn't covered.
Adam G. Unikowsky: IHS was chronically not paying.
Adam G. Unikowsky: And so, in '94, Congress added (a)(3) to clarify that those categories of costs are deemed to satisfy (a)(2).
Adam G. Unikowsky: So it seems to me that if Congress goes out of its way --
Clarence Thomas: Where does it say that?
Adam G. Unikowsky: Well, it says "shall include." So, if you look at the ordering, (a)(3) says the contract support costs that are eligible costs for the purposes of receiving funding under this chapter shall include the enumerated categories.
Adam G. Unikowsky: There's no cross-reference to (a)(2).
Adam G. Unikowsky: There's no proviso. There is a proviso on (a)(1) but not (a)(2).
Adam G. Unikowsky: So it just seems to me viewing this text literally, if you satisfy (a)(3), you prevail, and that's the point of adding this clarification.
Adam G. Unikowsky: But I just want to be clear, if you don't agree with anything I just said, that's not essential to our position.
Adam G. Unikowsky: If you think that we have to satisfy (a)(2), emphatically we think that we do.
Adam G. Unikowsky: You know, (a)(2) says that the costs shall consist of an amount for the reasonable cost of activities which must be carried out by a tribal organization as a contractor to ensure compliance with the terms of the contract.
Adam G. Unikowsky: That is satisfied because (m)(1) is a term of the contract.
Adam G. Unikowsky: When we are collecting and then spending the --the program income, we are acting as a contractor.
Adam G. Unikowsky: We must, under the contract, collect this money and spend it on healthcare services.
Adam G. Unikowsky: So we're acting as a contractor just as much as we're acting as a contractor when we spend money on the secretarial amount.
Adam G. Unikowsky: So, based on the first part of the argument, there was a number of questions that arose which I wanted to answer.
Adam G. Unikowsky: I wanted to answer the questions about non -beneficiaries, as well as some of Justice Barrett and some of Justice Kavana ugh's questions.
Ketanji Brown Jackson: Can I just ask you
Adam G. Unikowsky: Yes.
Adam G. Unikowsky: I'm sorry.
Ketanji Brown Jackson: -- before you do that, really quickly, so (m)(1) is a term of the contract, but what do you say about their argument that (m) -- the (m)(1) obligation is more open-ended than the scope of the work itself?
Adam G. Unikowsky: Well, I mean, it does give the tribe a measure of discretion.
Adam G. Unikowsky: It talks about general purposes, but I think that has to be read in conjunction with the contract itself, which doesn't say that the purpose is just generally promote healthcare or generally promote --to promote, excuse me, self-determination.
Adam G. Unikowsky: There's like a purpose provision that says that the purpose of the contract is to transfer an enumerated set -- enumerated set of obligations from IHS to the tribe.
Adam G. Unikowsky: So it seems to me that furthering the general purpose of the contract requires slotting it in one of those enumerated purposes or at least something that's like really close to those purposes.
Adam G. Unikowsky: I realize the word "purpose" has "general," the word "general," attached to it, but I don't think that that entitles the tribe to just do whatever it wants to or spend the money on healthcare in general.
Adam G. Unikowsky: It's got to be tied to the purpose provision in the contract itself.
John G. Roberts, Jr.: Well, but, I mean, if you add the direction to interpret the statutory language in favor of the tribes, that purpose provision doesn't seem to me to be a very significant constraint.
John G. Roberts, Jr.: I mean, the -- you know, the -- the argument on the other side or at least one of the concerns is that the tribes would be able to expand the provision of healthcare to all sorts of areas that do not primarily benefit tribal members and yet still be entitled to reimbursement.
Adam G. Unikowsky: All right.
Adam G. Unikowsky: So let me address this issue of non-beneficiaries head-on because I understand it came up significantly in the first part of the argument.
Adam G. Unikowsky: Okay.
Adam G. Unikowsky: So, first of all, for about half of tribes, including San Carlos, they don't serve non-beneficiaries at all.
Adam G. Unikowsky: Even for the others, it's often very little.
Adam G. Unikowsky: So let me just explain what Northern Arapaho does because a statement was made in the first half of the argument about Northern Arapaho's services to non-beneficiaries. Non--- Northern Arapaho does serve non-beneficiaries but only if they're employees of Northern Arapaho's healthcare program, and that's less than 3 percent of the total number of users of Northern Arapaho's program.
Adam G. Unikowsky: So, if there's a nurse who's non-Indian who lives on the reservation and works at a Northern Arapaho clinic and then she wants to get her blood pressure checked, then, as an employee benefit, she can do that in the same building.
Adam G. Unikowsky: She doesn't have to drive potentially a long distance in central Wyoming to some other clinic.
Adam G. Unikowsky: But that is not -- that's not paid for by IHS.
Adam G. Unikowsky: She has to pay out of pocket or, realistically, from her own insurance policy, okay? So none of the Secretary's funding ever goes to the provision of healthcare to those non-beneficiaries.
Elena Kagan: That's not true for some tribes, is it?
Adam G. Unikowsky: No, I think it's true for all tribes.
Adam G. Unikowsky: The tribes can serve, but they can't spend the government's money because there can't be a diminution of healthcare services for Indians.
Adam G. Unikowsky: So I think the way it works is the non-Indian has to pay out of pocket or from the person's own insurance policy, and the tribe collects that money.
Adam G. Unikowsky: I will acknowledge the tribe does consider that to be program income. That's not a question raised in this case.
Adam G. Unikowsky: But the tribe thinks that if it's actually collecting that money, that's prog ram income, but it then spends every single penny of that money on services for Indians.
Adam G. Unikowsky: We never ever spend the program income that we obtain on services for non -Indians.
John G. Roberts, Jr.: Well, but you're --
Elena Kagan: And is that true for all tribes?
Adam G. Unikowsky: Yes, I think it is true.
Adam G. Unikowsky: Absolutely it's true, that non-Indians who use the services, they have to pay from their own insurance policy.
Adam G. Unikowsky: The tribe might collect that money and spend it, but the tribe is not spending program income to fund services for non-Indians.
John G. Roberts, Jr.: Well, you're talking about the principle, but we're talking about support services, and I assume they don't -- well, maybe they do -- allocate support services differently depending upon which services go primarily to non- -- non-tribal members and others to tribal members?
Adam G. Unikowsky: So, historically, Northern Arapaho hasn't done that just because it's such a tiny percentage.
Adam G. Unikowsky: That's a question that's not raised in this case.
Adam G. Unikowsky: I think that the government, if it wishes to, can argue, can defend the case on the ground that a portion of the services that are allocable to non -Indians shouldn't be included. And that's fine.
Adam G. Unikowsky: That can --that can be litigated.
Adam G. Unikowsky: I mean, there's -- the -- the argument on the other side is that there's this provision, Section 1680, that says -- 1680c, that says that services provided shall be --to non-Indians shall be deemed to be provided under this agreement.
Adam G. Unikowsky: But, like, that hasn't been construed.
Adam G. Unikowsky: It's not an issue in this case.
Adam G. Unikowsky: So we'd ask the Court to -- to reserve tha t question.
Elena Kagan: So if I can understand what your argument on page 27 refers to, what the limitation is in that argument and what it's not.
Adam G. Unikowsky: Okay.
Adam G. Unikowsky: So the argument --the alternative argument we have made is that every single penny of program income that we receive under these contract years, we spend it on services enumerated in the scope of work for Indians only, okay? And that's really because the scope of work for Northern Arapaho is pretty broad.
Adam G. Unikowsky: It's like all, you know, outpatient medical services, dental services, radiology.
Adam G. Unikowsky: There's, you know, behavioral health.
Adam G. Unikowsky: There's lots and lots of different services that are transferred in the scope of work.
Adam G. Unikowsky: And so every --all the dollars we spend are allocated towards programs in the scope of work.
Adam G. Unikowsky: But I just want to be clear, the -- the broader argument, we're not saying you can use program income to give -- to -- to offer services to non-Indians, okay? I think all those services have to go towards Indians. That's what the general purpose of the contract is.
Adam G. Unikowsky: It's to serve Indians.
Adam G. Unikowsky: And so --
Samuel A. Alito, Jr.: Well, put aside --
Amy Coney Barrett: But you're saying you should get --
Samuel A. Alito, Jr.: -- put aside the question of what you are doing and focus on the question of what the statutory language means. So what exactly are the general purposes of the contract under 5325(m)(1)?
Adam G. Unikowsky: Okay.
Adam G. Unikowsky: So the purposes of the contract -- I'll get to "general" -- the modifier "general" in just one second.
Adam G. Unikowsky: The purposes of the contract are laid out in the self-determination agreement -- contract itself. And that's part of the model agreement.
Adam G. Unikowsky: It says the purposes are to transfer the enumerated set of services from IHS to the tribe.
Adam G. Unikowsky: That's the purpose.
Adam G. Unikowsky: So, in terms of what "general purpose" means, I think that gives the tribe a little bit of discretion.
Adam G. Unikowsky: Just as one example, tribes have generally construed "general purposes" to open the door to building facilities at which the services will be offered.
Adam G. Unikowsky: So, for instance, if, you know, the responsibility for dental services is transferred, tribes have construed that language to say you can build a clinic.
Samuel A. Alito, Jr.: Well, is -- are the -- could you give me a simpler answer or maybe it doesn't lend itself to a simpler answer? Are the general purposes of the contract simply to further Indian health?
Adam G. Unikowsky: No.
Adam G. Unikowsky: I think it's narrower than that --
Samuel A. Alito, Jr.: No?
Adam G. Unikowsky: -- Your Honor.
Samuel A. Alito, Jr.: Okay.
Samuel A. Alito, Jr.: In -- in what way is it narrower?
Adam G. Unikowsky: I think it's -- the general purpose is you look at the purpose of the contract as laid out in the contract itself, and I think the word "general" modifier requires that at least it be related to those purposes, right, not just anything to do with Indian health.
Adam G. Unikowsky: I just want to make one other point about that.
Elena Kagan: So it's easier to say
Samuel A. Alito, Jr.: But I still don't understand the -- could you just tell me what it means?
Adam G. Unikowsky: Yeah.
Adam G. Unikowsky: So --
Samuel A. Alito, Jr.: What does it not mean? Suppose -- suppose the tribe wants to set up a scholarship program for tribal members or Indians to go to medical school.
Samuel A. Alito, Jr.: Does that fall within the general purposes of the contract?
Adam G. Unikowsky: I probably would say no.
Adam G. Unikowsky: This question has never come up.
Adam G. Unikowsky: It's never been litigated a single time for a practical reason.
Samuel A. Alito, Jr.: Yeah.
Samuel A. Alito, Jr.: Well, now it's being litigated.
Adam G. Unikowsky: No, it's not, Your Honor, because there's no disputes in this case that we satisfy the general purposes provision. The reason that this generally has not --
Samuel A. Alito, Jr.: But we have to sa y what "general purposes" means.
Adam G. Unikowsky: I don't think so, Your Honor.
Adam G. Unikowsky: I think --
Samuel A. Alito, Jr.: No?
Adam G. Unikowsky: -- that you should hold that, as long as that is satisfied, as long as the tribe are adhering to that contractual obligation, then it's -- it's acting pursuant to the contract.
Adam G. Unikowsky: The reason this has not -- never been litigated, what "general purposes" means, is that the amount of money that the tribe gets is the sum of these two funding streams, and Congress understands that that sum is necessary just to serve the services under the contract. Like --
Neil Gorsuch: Mr. Unikowsky?
Adam G. Unikowsky: Yes?
Neil Gorsuch: There's not so much money here that the tribes are spending this on frolics and detours, right? I mean --
Adam G. Unikowsky: That's correct, Your Honor.
Adam G. Unikowsky: There's not even close to enough money.
Neil Gorsuch: -- I mean, there's not even enough money to provide healthcare to the Indians on the reservations, and you're -- you're -- you're operating out of decrepit old buildings in many cases.
Neil Gorsuch: And -- and that's what we're really talking about.
Neil Gorsuch: Nor are Indian -- Indian Healthcare Services providing massive benefits to non-Indians all across America. We're talking about a reservation in central Wyoming with an incredibly poor population of Native Americans.
Neil Gorsuch: And general purposes of the contract, you'd agree it has to be Indians?
Adam G. Unikowsky: One hundred percent I agree, Your Honor.
Neil Gorsuch: And in your contract, in terms of what's enumerated as the general purposes, include outpatient ambulatory medical care and primary care, nursing, mental health, the clinical medical laboratory, radiology, physical therapy, the pharmacy, optometry, dental care, and community health. You'd agree it has to be limited to those things too?
Adam G. Unikowsky: Yes, Your Honor, absolutely, 100 percent.
Brett M. Kavanaugh: If a --
Elena Kagan: And if it were a tribe that had a --you seem to provide pretty much the full gamut of healthcare services, but if they were a tribe that didn't, that said, you know, we're only providing emergency services, something like that, then it would have to go only to emergency services, is that correct?
Adam G. Unikowsky: I agree.
Adam G. Unikowsky: I mean, that's maybe more of a question for Mr. Miller, who -- his client had such a contract.
Adam G. Unikowsky: But, yes, that is my understanding of -- of "general purposes."
Sonia Sotomayor: What do you do with their argument that there are expenses that the government doesn't incur, like building buildings, that that's not included in their formula? Why should you get support service funds for that activity?
Adam G. Unikowsky: So my primary answer to that is we actually don't.
Adam G. Unikowsky: I mean, there's -- there's back-and-forth in the briefs about this, but, like, the cost methodology of IHS actually requires us to deduct the construction cost from the cost base when we're calculating contract support costs.
Adam G. Unikowsky: So, translated into English, what that means is that if we're essentially hiring a subcontract to build a building, we just transfer a bunch of money to the subcontractor, that doesn't generate overhead costs.
Adam G. Unikowsky: It's the subcontractor who has the overhead, not us.
Adam G. Unikowsky: So, under the IHS's cost allocation methodology in the Indian Health Manual, we have to deduct those costs anyway.
Adam G. Unikowsky: So, as a practical matter, it --it really doesn't come up.
Adam G. Unikowsky: The other thing is it's not like Congress doesn't like construction.
Adam G. Unikowsky: It's just there's two separate appropriations provisions. Like there's one to the Indian Health Service for services, and then there's a separate stream for --for construction.
Adam G. Unikowsky: And so Congress has just ensured that there's no mixing, that a certain amount of money is for services and a certain amount is for --
Brett M. Kavanaugh: On -- on --
Sonia Sotomayor: So to -- to the extent that the government doesn't pay for certain things or they're not included in the program, you're not getting reimbursed contract
Adam G. Unikowsky: No, we don't -- we don't add, we don't seek contract support costs.
Sonia Sotomayor: All right.
Sonia Sotomayor: Could I ask one -- I mean, the government, one of their biggest arguments is the practical consequences of this, that you're going to be depriving money from direct service tribes.
Sonia Sotomayor: How do you respond to that?
Adam G. Unikowsky: All right.
Adam G. Unikowsky: If I can offer a couple responses.
Adam G. Unikowsky: So, first of all, the liberal construction provision in the self-determination contract says that the -- provisions of the statute and contract will be construed liberally for the benefit of the contractor.
Adam G. Unikowsky: So that's the -- that's not all tribes in general.
Adam G. Unikowsky: That's for the contractor in particular.
Adam G. Unikowsky: So I think the Court should -- should remain focused on the contractor's interests when applying that.
Adam G. Unikowsky: Second of all, I -- I think it's going
Sonia Sotomayor: It's a nice answer, but it doesn't answer --
Adam G. Unikowsky: Well, no, but I have --I have a different answer, okay? (Laughter.)
Adam G. Unikowsky: So I -- I think it's notable that two pantribal organizations, the National Indian Health Board and the National Congress of American Indians, both of which have members, both ISDA and non -ISDA members, have submitted amicus briefs in our support because I think the feeling is among tribal organizations that the Self-Determination Act is so important for Indian sovereignty that we're willing to accept the risk that Your Hono r just identified.
Brett M. Kavanaugh: And the risk is if -- just so I understand it, if Congress doesn't change the discretionary funding cap that applies to IHS generally and you prevail in this case, it necessarily will mean less funding for other tribes that IHS directly provides healthcare for? Is that the --that's the issue?
Adam G. Unikowsky: That's the -- that's the -- I mean, that's assuming that the appropriations amount will stay the same, and that's completely speculative.
Adam G. Unikowsky: I mean, after the Salazar --
Brett M. Kavanaugh: Right.
Brett M. Kavanaugh: I --I said if.
Adam G. Unikowsky: Yeah, if.
Brett M. Kavanaugh: If it stays the same, your position will hurt the other tribes?
Adam G. Unikowsky: Theoretically, there would -- you know, yes, if there's a limited pot of money and more goes to one thing, then less goes to the other.
Adam G. Unikowsky: That's just simple mathematics.
Brett M. Kavanaugh: Exactly.
Brett M. Kavanaugh: That's why it's --we've got -- we've got to think about this more generally than just -- I mean, your first answer to Justice Sotomayor was a bit narrow.
Brett M. Kavanaugh: Thank you.
John G. Roberts, Jr.: Thank you, counsel.
John G. Roberts, Jr.: Justice Thomas? Justice Alito?
Samuel A. Alito, Jr.: It's my understanding that the tribes have been able to collect program income subject to 5325(m)(1) for many years.
Samuel A. Alito, Jr.: When was the first time a tribe made the type of challenge that is before us here?
Adam G. Unikowsky: I think it was in the early 2010s, but I think there's a good explanation for that, Your Honor.
Samuel A. Alito, Jr.: So how is it that these tribes represented by excellent attorneys like you and Mr. Lloyd left all this money on the table for so many years?
Adam G. Unikowsky: So there's two basic answers.
Adam G. Unikowsky: One is that for many years there's these appropriations caps under which tribes couldn't even recover contract support costs on the secretarial amount.
Adam G. Unikowsky: It took two cases from this Court, the Cherokee Nation case and then the Salazar versus Ramah Navajo Chapter case in 2012, for this Court to hold that the tribes actually are entitled to all of the contract support costs under the statute, and that's when these lawsuits started being brought.
Adam G. Unikowsky: And the second point is the payor of last resort provision that Justice Gorsuch raised.
Adam G. Unikowsky: So, like, that's when tribes really started feeling like they had to go out and collect this money, they had no choice.
Adam G. Unikowsky: And, by the way, it's not just the statute.
Adam G. Unikowsky: Our contract, Northern Arapaho's contract, also requires us to collect it, and so we were encountering all of these support costs.
Adam G. Unikowsky: So this issue just didn't come up.
Adam G. Unikowsky: I don't think that there's some kind of tradition here that's really relevant because the facts on the ground changed in the early 2010s.
Adam G. Unikowsky: That's when the tribes started bringing these laws uits.
Samuel A. Alito, Jr.: All right.
Samuel A. Alito, Jr.: So the statute of limitations for this is six years, right?
Adam G. Unikowsky: Correct.
Samuel A. Alito, Jr.: And if the government is right that the annual costs of accepting your reading could be $2 billion, then the first year bill could be more than $12 billion?
Adam G. Unikowsky: I don't think that's the case.
Adam G. Unikowsky: So, first of all, that 800 --
Samuel A. Alito, Jr.: Why not? Why would that not be the case?
Adam G. Unikowsky: Well, first of all, we don't know where that estimate comes from. Like, that's not in the record.
Adam G. Unikowsky: It's just a conversation between someone at IHS with the SG's office giving these numbers that come out of nowhere from our perspective.
Samuel A. Alito, Jr.: Well, what numbers do you have?
Adam G. Unikowsky: We don't have any numbers.
Adam G. Unikowsky: It's not -- I mean, having to talk to people in -- in this area, people are -- tend to be skeptical of these high numbers.
Adam G. Unikowsky: Like, the government takes the position, it represents that contract support costs will start exceeding the secretarial amount.
Adam G. Unikowsky: I don't think that's ever happened. That's certainly not true in these cases.
Adam G. Unikowsky: I think that's extremely speculative.
Adam G. Unikowsky: And also, the other thing is, I mean, it's true there's a six-year statute of limitations, but I don't think every single tribe in the country is going to necessarily bring these suits.
Adam G. Unikowsky: I mean, I can't -- I can't predict.
Samuel A. Alito, Jr.: Why would they not?
Adam G. Unikowsky: I mean, maybe they -- I mean, I can't predict the types of litigations that are going to happen, but, you know, I mean, this is what the statute requires, Your Honor. I mean, the government may --
Samuel A. Alito, Jr.: Well, what if it turns out that their estimate is right, it's $2 billion a year, so the bill for the first year is $12 billion? I mean, maybe today $12 bi llion is not very much money.
Samuel A. Alito, Jr.: But then what would we do? Would we say, well, gee, we made a mistake, we decided the case based on the wrong assumption?
Adam G. Unikowsky: No, I don't think that the amount of money in hypothetical judgments from a number that is not in the record and it was just taken out of nowhere is a basis to decide this case against the tribe.
Samuel A. Alito, Jr.: Well, if it has such -- if your reading has such severe consequences, does that say something about the plausibility of the reading?
Adam G. Unikowsky: I don't think -- I just respectfully disagree.
Samuel A. Alito, Jr.: Congress hid this -- this --this mastodon in an ant hill, in an ant hole or whatever it is, elephants in mouse holes? This is even bigger?
Adam G. Unikowsky: I don't think it's really an elephant in a mouse hole.
Adam G. Unikowsky: I mean, the amount of program income we're -- we're already getting contract support costs in the secretarial amount.
Adam G. Unikowsky: There's in some cases a smaller, occasionally a larger amount of program income, and we're just seeking the same reimbursement based on the same rate for that additional unit of income.
Adam G. Unikowsky: So I -- I just -- I don't think it's -- it's that extreme of an outlier.
Samuel A. Alito, Jr.: Thank you, thank you.
John G. Roberts, Jr.: Justice Sotomayor? Justice Kagan? Justice Gorsuch?
Neil Gorsuch: I just want to make sure I got it right with respect to why this happened.
Neil Gorsuch: You brought suit in 2011, I think, is that right, somewhere in there? One of you did.
Adam G. Unikowsky: It was not my -- our case, ours is 2016 and 2017.
Neil Gorsuch: 2017?
Adam G. Unikowsky: That's ours, yeah.
Neil Gorsuch: All right, all right.
Neil Gorsuch: Okay.
Neil Gorsuch: I think one was 2011.
Adam G. Unikowsky: But we -- we weren't -- we didn't even enter into these contracts until then, so --
Neil Gorsuch: Okay.
Neil Gorsuch: So you couldn't have brought it before then anyway.
Adam G. Unikowsky: No.
Neil Gorsuch: And then 2010 you became the payor of last resort.
Neil Gorsuch: You have a contractual obligation to collect these monies.
Adam G. Unikowsky: Right.
Neil Gorsuch: Obviously, that's why now it becomes what happens about spending it.
Adam G. Unikowsky: Right.
Adam G. Unikowsky: Plus, tribes weren't -- I mean, again, like before 2012, tribes were getting much less than they were entitled to under the statute because of these appropriations caps which have been lifted by Congress after this Court's decision in Salazar versus Ramah Navajo Chapter.
Adam G. Unikowsky: That's what got a lot of this litigation started.
Neil Gorsuch: Do you know how much money your client is seeking in contract support costs roughly?
Adam G. Unikowsky: In this case, we're seeking about $1.5 million for '16 and '17.
Neil Gorsuch: One point five million dollars?
Adam G. Unikowsky: About that, yes.
Neil Gorsuch: So this 800 million to 2 billion that's on page 44 of their brief, there's no cite?
Adam G. Unikowsky: No, it's an unexplained estimate by IHS that's not in the record of how much something is going to cost. I have to say, like --
Neil Gorsuch: And that's also premised perhaps on their understanding that general purposes can include creating --
Adam G. Unikowsky: That it cycles, that's right.
Neil Gorsuch: -- health spas for non-Indians. MR. UNIKOWSKY.
Neil Gorsuch: Yeah, it's like there's this language in the brief about cycles of spending money, and we think that's completely implausible, and that may have been baked into this unexplained number, Your Honor.
Neil Gorsuch: We don't usually allow record evidence to be introduced for the first time in this Court without a citation to anything that might include services that would not be even covered under your interpretation of the agreement.
Adam G. Unikowsky: I agree.
Adam G. Unikowsky: I also think the Court can take judicial notice that unexplained government estimates about how much things will cost are not always perfectly accurate, so we'd ask the Court to apply that principle here.
Neil Gorsuch: Thank you.
Brett M. Kavanaugh: They usually underestimate it, but anyway, that's a -- that's a separate issue.
Brett M. Kavanaugh: Do I have it right that the question here is about the pot of money that comes in from third -party payors, from Medicare, insurers, tortfeasors and what have you, and then you take that pot of money which is under a separate statute and you spend that for healthcare services, correct?
Adam G. Unikowsky: Well, I would quibble with under a separate statute.
Adam G. Unikowsky: It's 23 -- 5325(m)(1) and (m)(2).
Adam G. Unikowsky: But, yes, we take the money from Medicare and Medicaid and we spend it on -- on healthcare.
Brett M. Kavanaugh: And if you were to lose this case, what you do as I understand it, what has happened previously is that you use that pot of money which is separate from the IHS appropriated money that comes to you, you use that pot of money to pay not only for the Indian healthcare services but for these overhead costs, right? It comes out of that pot of money?
Adam G. Unikowsky: That's correct.
Adam G. Unikowsky: We'd have to use that or maybe the tribe's general treasury, but we wouldn't have -- get it from the Secretary.
Brett M. Kavanaugh: Okay.
Brett M. Kavanaugh: And what do you do with -- I don't know that we've mentioned it as much -- 5325(m), the provision that says the third-party income's not a basis for reducing the allocation that comes from IHS, which suggests that Congress was concerned about, oh, because you get this third-party money, maybe the IHS amount should be reduced, and Congress wanted to say no, that's -- that's not correct, and from that, the implication would be surely they were not anticipating, oh, that it would increase.
Brett M. Kavanaugh: Just want to make sure you can respond to that.
Adam G. Unikowsky: Yeah, I don't agree with that inference.
Adam G. Unikowsky: I think that (m) should be construed literally.
Adam G. Unikowsky: As you said, Congress was concerned that IHS would deduct because of the program income and it said don't deduct.
Adam G. Unikowsky: And in the exact same statutory amendment in which (m) was enacted, (a)(3) was enacted to specifically address contract support costs.
Adam G. Unikowsky: So, instead of drawing a negative implication from (m), I think I would just look at the -- a provision just joined at the hip in the exact same enactment, (a)(3), that specifically addresses the issue of contract support costs and said that we can recover all costs that are in connection with the operation of the federal program, which I think includes program income.
Adam G. Unikowsky: It's the same word, "program," in both provisions.
Brett M. Kavanaugh: Do you agree that to be an (a)(3) cost, it has to be an (a)(2) cost?
Adam G. Unikowsky: So I don't agree, but even if I'm wrong on that, it doesn't affect our position one bit.
Brett M. Kavanaugh: Thank you.
John G. Roberts, Jr.: Justice Barrett?
Amy Coney Barrett: Okay.
Amy Coney Barrett: Tell me why it doesn't affect your position one bit, because it seems to me under (a)(2), you know, there are two qualifications in (A) and (B), and I think (B) doesn't seem to fit very well, so it would have to be (A), but that doesn't seem to fit very well either.
Amy Coney Barrett: So explain to me why that's wrong.
Adam G. Unikowsky: Well, I don't agree, Your Honor.
Adam G. Unikowsky: In fact, I don't even think it's disputed that we satisfy (A) and (B).
Adam G. Unikowsky: I think the government is disputing the --the earlier part of the statute talking about a contract to ensure compliance.
Adam G. Unikowsky: So -- so, for example, (A) covers things like stuff that the -- that OPM would do, human resources or contracting services that GSA would do, things like that.
Amy Coney Barrett: You mean like everybody keeps talking about workers' comp?
Adam G. Unikowsky: Yeah.
Adam G. Unikowsky: That's -- well, that's not -- that's another thing.
Amy Coney Barrett: That's another thing?
Adam G. Unikowsky: Yeah.
Amy Coney Barrett: Okay.
Adam G. Unikowsky: But -- so overhead -- most of these costs are actually indirect costs, not direct costs --
Amy Coney Barrett: Okay.
Adam G. Unikowsky: -- which would be workers' comp.
Adam G. Unikowsky: So, for example, you know, the tribe wants to hire someone, okay?
Amy Coney Barrett: Right.
Adam G. Unikowsky: There needs to be an HR person.
Adam G. Unikowsky: So, if IHS is running healthcare, OPM, a separate branch of the government, is going to be doing all that HR stuff, putting them on the payroll, making sure they're paid, handling their pensions.
Adam G. Unikowsky: So that's an -- that's an (A) cost, okay?
Amy Coney Barrett: Okay.
Adam G. Unikowsky: And so the tribe gets that from the government because, you know, if -- if IHS isn't paying for it, nor should the tribe.
Adam G. Unikowsky: So what we're seeking in this case are all costs that fall under (A) or (B).
Adam G. Unikowsky: It's the exact same type of overhead that the Secretary wouldn't pay out of pocket.
Adam G. Unikowsky: It's just with respect to the programs funded by the program income.
Adam G. Unikowsky: So, for example, you know, if there's contracting, GSA would do the work.
Adam G. Unikowsky: If IHS was handling the program, we're doing the work when we're handling the program.
Adam G. Unikowsky: That's the money we're seeking, just (A) and (B) money.
Adam G. Unikowsky: And --
Amy Coney Barrett: Okay.
Adam G. Unikowsky: -- again, the government does not dispute, as far as I can tell, that we satisfy (A) and (B).
Adam G. Unikowsky: All they're disputing is whether we --we're acting as a "contractor," which is the earlier part of (2).
Amy Coney Barrett: Right.
Adam G. Unikowsky: And I think we are because we are carrying out our contractual obligations when we perform these services under (A)(i).
Amy Coney Barrett: In the same way that the Secretary would?
Adam G. Unikowsky: Yes.
Amy Coney Barrett: In the same way that IHS would if IHS were spending the third-party income?
Adam G. Unikowsky: One -- 100 percent. IHS is required to spend the third -- to collect the third-party money under 1623 and then spend it.
Adam G. Unikowsky: So we're stepping into their shoes.
Adam G. Unikowsky: We also are required to collect that money and spend it, and so we're just asking to be put into the same -- into their shoes for purposes of contract support costs.
Amy Coney Barrett: And when you spend it when you're standing in their shoes, this back-and-forth about what furthers the general purposes of the contract, you would say or would you not say that you can only claim these contract support costs for expenditures that are of the sort that IHS would also make --
Adam G. Unikowsky: Oh --
Amy Coney Barrett: -- or is it a broader universe?
Adam G. Unikowsky: No, I think, because IHS also has a lot of discretion.
Adam G. Unikowsky: So we -- it says for us "further the general purposes of the contract." But IHS has a very, very broad discretion to spend the money on Indian healthcare as well.
Adam G. Unikowsky: Like, it's true it's possible that we might spend a particular dollar differently from how IHS would.
Amy Coney Barrett: Mm-hmm.
Adam G. Unikowsky: But, first of all, that h appens with the secretarial amount too because the whole point of this statute is to promote self-determination.
Adam G. Unikowsky: It reflects the assumption that the tribes may spend a particular dollar differently from how IHS would do it, and Congress thought that was a good thing.
Adam G. Unikowsky: So both -- both the tribe and the IHS has a measure of flexibility in spending this money on healthcare.
Adam G. Unikowsky: Individual dollars might be allocated differently, but the types of things we're doing, spending money on healthcare, are exactly the types of things that IHS would be doing with the same money.
Amy Coney Barrett: Which might be a reason why your concession is -- was that it can't be spent on non-Indian healthcare because IHS wouldn't spend it?
Adam G. Unikowsky: Absolutely not.
Amy Coney Barrett: So you couldn't stand in their shoes --
Adam G. Unikowsky: No.
Amy Coney Barrett: -- for that purpose.
Adam G. Unikowsky: We -- we -- 100 percent, no, we cannot spend and we do not spend this money on non-Indian healthcare.
Adam G. Unikowsky: If an employee of our program uses the blood pressure facilities or goes to the dentist at one of our clinics, they pay from their own insurance.
Amy Coney Barrett: But you're -- you're collecting the overhead costs of that in contract support costs because you don't parse all that out, right?
Adam G. Unikowsky: So that -- that --so that's not an issue that's been raised in this case.
Adam G. Unikowsky: Just because it's so de minimis, I think, we haven't done that.
Adam G. Unikowsky: It's possible in a different case the government can say you have to parse that out, and that -- that's an issue that can be litigated.
Amy Coney Barrett: Is there anything that you spend these third -party funds on that IHS does not, or is it complete overlapping circles?
Adam G. Unikowsky: In some of the years after the years in question, I think we spent some of the mone y on facility construction, which IHS doesn't under these riders.
Adam G. Unikowsky: But, again, like, the -- the federal government spends money on facilities.
Adam G. Unikowsky: They're just a separate stream of appropriations.
Adam G. Unikowsky: But, in general, when we do that -- and, again, that's -- the representation in my brief is --is accurate because these are years after the years in question.
Amy Coney Barrett: Mm-hmm.
Adam G. Unikowsky: Even when we've done that, we don't consider that to be included in the base.
Amy Coney Barrett: Okay.
Adam G. Unikowsky: As I said, we deduct the costs of construction.
Amy Coney Barrett: Okay.
Amy Coney Barrett: Thank you.
John G. Roberts, Jr.: Justice Jackson?
Ketanji Brown Jackson: So I just want to be clear on the purposes of the contract because that's the most interesting thing that I think I've heard you say.
Ketanji Brown Jackson: In looking at the Joint Appendix, there are -- the contract agreements are here, and there are enumerated purposes.
Adam G. Unikowsky: Yes.
Ketanji Brown Jackson: I'm looking at JA 51, 52.
Ketanji Brown Jackson: So it's your position that these third-party funds would have to be spent for one of these enumerated categories?
Adam G. Unikowsky: Yes.
Adam G. Unikowsky: So that -- that's actually San Carlos's contract.
Ketanji Brown Jackson: Oh, I'm sorry. That's not yours.
Ketanji Brown Jackson: Excuse me.
Adam G. Unikowsky: Ours is at 124, 125.
Ketanji Brown Jackson: Yes.
Adam G. Unikowsky: So we spend --so, I mean, it says "general purposes," which might modify "purposes" a little bit, but as a practical matter, we spend all the program income on the services on -- on 124 and 125.
Ketanji Brown Jackson: Would you have to?
Adam G. Unikowsky: Yeah, I think so.
Adam G. Unikowsky: I think we do have to.
Adam G. Unikowsky: I don't think "general purposes" modifies "purposes" to a sufficient degree that we can just go on a frolic and spend money on some completely different thin g.
Ketanji Brown Jackson: So that -- so that's also an answer to Justice Barrett's question?
Adam G. Unikowsky: Yes.
Ketanji Brown Jackson: That's a limitation on you?
Adam G. Unikowsky: That's how we understand it, yes.
Ketanji Brown Jackson: Thank you.
John G. Roberts, Jr.: Thank you, counsel.
Lloyd B. Miller: Maybe I'll --
John G. Roberts, Jr.: Mr. Miller.
Lloyd B. Miller: Mr. Chief Justice, may it please the Court: Maybe I'll begin with Justice Jackson's question about page 51.
Lloyd B. Miller: We have six programs here, including the EMS program, which is a major feature of the government's motion to dismiss that is the subject of this case.
Lloyd B. Miller: The third-party revenue spending has to be anchored to those six programs.
Lloyd B. Miller: It cannot be spent on a dental program.
Lloyd B. Miller: We don't see dental there.
Lloyd B. Miller: It cannot be spent just on general health.
Lloyd B. Miller: Even interpreting that term broadly and generously in light of the Indian canon, it still has to be anchored in these six programs.
Lloyd B. Miller: With regard to these si x programs, when the Indian Health Service awarded a contract to the San Carlos Apache Tribe, and just visualize this, we're talking about 1.8 million acres, about 29,000 square miles, a thousand miles of roadless area, a couple hours east of Phoenix, the Emergency Medical Service program was severely underfunded.
Lloyd B. Miller: So, on page 101, the Indian Health Service demands that the tribe agree to a clause that says, in running the EMS program, it will maintain an efficient billing system to maximiz e third-party revenues. Why? Because IHS knew that there was no way this program could be run at even a moderate level without third-party revenues coming into the program and going out into the program, coming in from program income and going out into services.
Lloyd B. Miller: So that's why this clause is such a pivotal element of the contract.
Lloyd B. Miller: Now we rely on (m) --(m)(1), and (m)(1) was enacted in 1994, but that was not the first time the concept that program inc ome goes into the contract was invented.
Lloyd B. Miller: First of all, it is a standard government contracting clause in the OMB regulations.
Lloyd B. Miller: You can go to 2 C.F.R. 200.307, I think it's (e)(2).
Lloyd B. Miller: But, more specifically, the Indian Health Service, in the sample contract that the Indian Health Service had in the 1980s, required that all program income be spent to provide additional services and benefits under the contract.
Lloyd B. Miller: So this was an old concept, not a new concept, that Congress put in there in 1994. Well, why did Congress put it in 1994? I mean, there it was in the sample contract that IHS had because Congress decided that IHS could not be trusted to administer this program at all. That was the positive provision, that program income comes into the contract, but there were a lot of negative provisions in the old sample contract.
Lloyd B. Miller: There were a lot of negative provisions in regulations that IHS had adopted, proposed to adopt in January '94.
Lloyd B. Miller: So Congress comes in, clears the decks, says we are declaring what the master contract is going to say, we are prohibiting a raft of things that the agency proposed in these regulations, but we are cementing the good things.
Lloyd B. Miller: And one of the good things was (m)(1), that all program income had to go to further the general purposes of the contract.
Lloyd B. Miller: So too the question about (a)(2) and (a)(3) and how they relate.
Lloyd B. Miller: They require the administration -- the overhead has to be in connection with the expenditure of -- of -- of -- excuse me, with the administration of the contract.
Lloyd B. Miller: And the contract, as we just saw, requires the spending of program income.
Lloyd B. Miller: So we satisfy (a)(3).
Lloyd B. Miller: It's, of course, part of the federal program that we discussed earlier.
Lloyd B. Miller: The federal program includes direct service spending from the secretarial amount and also program income spending.
Lloyd B. Miller: So -- and IHS spends both tranches of money.
Lloyd B. Miller: The tribe spends both tranches of money.
John G. Roberts, Jr.: You -- you've heard --
Lloyd B. Miller: So it's indisputably part of the federal program.
John G. Roberts, Jr.: You've heard questions about a situation where the tribe may be spending money on services that go primarily to non -tribal members.
John G. Roberts, Jr.: What is your principle for limiting that, if there is one?
Lloyd B. Miller: Right.
Lloyd B. Miller: Well, of course, as Justice Kavanaugh pointed out, it's not presented in this case, but I will answer the question.
Lloyd B. Miller: The issue of the government's obligation with respect to services to non-beneficiaries has been litigated in another setting.
Lloyd B. Miller: Contract support costs are not the only mandatory spending under the Act.
Lloyd B. Miller: There's also leasing that is mandatory spending.
Lloyd B. Miller: If a tribe uses a tribal facility to run the federal program, then the federal government needs to pay the leasing costs.
Lloyd B. Miller: That issue has been litigated, and the Court have held in the Jamestown case that there's a reasonableness limitation to the leasing costs.
Lloyd B. Miller: Incidentally, reasonableness comes up twice, once in (a)(2), once in (a)(3). So there's a reasonableness limitation on the overhead also.
Lloyd B. Miller: So that's just thing one.
John G. Roberts, Jr.: Well, but that presumably doesn't have anything to do with the allocation between tribal members and non-tribal members.
Lloyd B. Miller: Oh, no.
Lloyd B. Miller: With respect, Your Honor, it would mean in this situation that if there were substantial overhead costs associated with services to non-beneficiaries, then you would discount that element, and IHS would not be responsible for reimbursing it.
Lloyd B. Miller: And I should note that IHS has a mechanism already for doing this.
Lloyd B. Miller: IHS does this in the leasing arena.
Lloyd B. Miller: If I go to IHS and ask for a lease to compensate for the use of a tribal facility, IHS will ask for data, how many non-beneficiaries do you serve? Zero.
Lloyd B. Miller: Then the they cover the whole lease.
Lloyd B. Miller: Fifty percent, which is unheard of, but 50 -- well, there are examples, I suppose, then IHS will whack off a part of the leasing cost to be sure that they are only supporting services to Indians because this is an Indian healthcare program.
Lloyd B. Miller: I also wanted to address the --
Brett M. Kavanaugh: Can I ask --
Lloyd B. Miller: Yes?
Brett M. Kavanaugh: -- on the question of whether the tribe can use this money for something that IHS itself couldn't use the money for, I think Mr. Unikowsky to Justice Barrett in that last colloquy at the very end noted facility construction, and I wanted to follow up with you on that since you're here on facility construction.
Brett M. Kavanaugh: If that happened with the use of these -- of the third-party income funds, overhead costs, your answer?
Lloyd B. Miller: Right.
Lloyd B. Miller: Thank you, Your Honor.
Lloyd B. Miller: As Mr. Unikowsky indicated, we don't have a separate appropriation for construction. IHS does.
Lloyd B. Miller: That's how they get their construction money --
Brett M. Kavanaugh: But that --
Lloyd B. Miller: -- a quarter of a billion dollars, but --
Brett M. Kavanaugh: -- that's not a -- okay.
Brett M. Kavanaugh: I'm going to stop you --
Lloyd B. Miller: -- I'm going --
Brett M. Kavanaugh: I'm going to stop you there.
Brett M. Kavanaugh: That is not an answer --
Lloyd B. Miller: Right.
Brett M. Kavanaugh: -- to the statutory question that Justice Barrett was posing.
Brett M. Kavanaugh: That's a --that's a real-world answer, which is a good real-world answer, but it's not -- I don't think it's a great statutory answer. So keep going.
Lloyd B. Miller: I -- I agree with Your Honor that if a -- if a construction activity serves the general purposes of, let's just take the EMS program, then it's under the umbrella. It's within.
Lloyd B. Miller: Let's consider it.
Lloyd B. Miller: So building a garage to house the ambulances or to do maintenance work on the ambulances, Roger.
Lloyd B. Miller: To build a new facility where the ambulance crews were sleeping because they were decrepit and there were -- there were holes in the walls and it was not an acceptable place for ambulance crews to sleep in between calls, so, yes, reconstructing a new facility to house the ambulance crews, absolutely.
Lloyd B. Miller: Are those construction activities things that the tribe can do with the third-party revenue money but that IHS cannot do because it needs permission from Congress? Yes. That is a fact.
Brett M. Kavanaugh: Yes is the answer to that?
Lloyd B. Miller: Yes is that --is the answer to that question.
Sonia Sotomayor: Would you ever --
Brett M. Kavanaugh: And the overhead -- the overhead for that, just to follow up on that, the overhead for that, or maybe you already answered this, I just want to --
Lloyd B. Miller: No, but thank you for asking the question.
Lloyd B. Miller: So the overhead on that, just as if you and I hire a --
Brett M. Kavanaugh: That's what you're seeking, right?
Lloyd B. Miller: Yes, but there would be no overhead on it, is what I was about to say, Your Honor.
Lloyd B. Miller: Unless I'm a general contractor -- building my own house, I hire a company to build a new house.
Lloyd B. Miller: And the tribe hires a company to build that garage.
Lloyd B. Miller: It doesn't build it itself.
Lloyd B. Miller: So the company that hires pays -- charges you $500,000, a million dollars to build that garage.
Lloyd B. Miller: You don't have any overhead.
Lloyd B. Miller: You just procure the contract, but you're not running the contract.
Lloyd B. Miller: So this is why my friend
Sonia Sotomayor: Counsel, you're taking a long time to answer the bottom line.
Lloyd B. Miller: Yeah.
Lloyd B. Miller: Justice --
Sonia Sotomayor: Are you going to include any overhead as contract support?
Lloyd B. Miller: No.
Sonia Sotomayor: Thank you.
Brett M. Kavanaugh: On the question of who's going to pay for this -- and the reason I am looking at this is not some kind of fiscal responsibility canon or something.
Brett M. Kavanaugh: It's just trying to figure out how Congress would have been thinking about this.
Brett M. Kavanaugh: But, if the discretionary cap stays the same, the money here --and I asked Mr. Unikowsky this -- the money here will necessarily come from other tribes receiving -- who don't provide the healthcare services themselves, where IHS provides the healthcare services directly.
Brett M. Kavanaugh: That's almost logically necessary, right?
Lloyd B. Miller: Well, it --it --
Brett M. Kavanaugh: That's not -- that doesn't de feat your argument, but it does perhaps shade how we think about the overall structure of the statute a little bit.
Lloyd B. Miller: I would incorporate by reference everything that my --my friend said, except the answer to that question.
Lloyd B. Miller: CBO will advise the appropriations chairman and chairwoman in the Senate and the House what the man --what the spending projections are for the next year.
Lloyd B. Miller: So, if Your Honors make a decision here in fiscal year '24 and we're looking at fiscal year '25 or '26, they will make that decision to the appropriate -- they will provide that information to the appropriators.
Lloyd B. Miller: The appropriators then have to divvy up the appropriation in 13 pieces, mindful of what they learned from CBO about all 13 of those.
Lloyd B. Miller: This cost, let's say it goes up $500 million, I have no idea what it would b e.
Lloyd B. Miller: There is no data on that.
Lloyd B. Miller: Then that is an element that the appropriations committee decides in allocating the 13.
Lloyd B. Miller: Then, when it gets to the environment and natural resources committee, that committee decides how to further divvy it up among the American Indian Museum and the BIA and the Interior Department and all of its agencies at the Interior Department.
Lloyd B. Miller: There is no way to predict what the ultimate impact would be on the funding of the Indian Health Service, none at all.
Lloyd B. Miller: And to suggest that no, no, it's going to be a dollar -for -dollar impact on Indian services, it wasn't after the Ramah case.
Brett M. Kavanaugh: Right.
Lloyd B. Miller: That's the best proof.
Brett M. Kavanaugh: So I think I -- I -- so that's --a reasonable answer to that question would be, well, you're assuming the discretionary cap would stay the same, but you're wrong.
Brett M. Kavanaugh: I'm wrong in thinking that the discretionary cap will necessarily stay the same based on the process.
Brett M. Kavanaugh: That's a predictive judgment you're making.
Lloyd B. Miller: Right.
Lloyd B. Miller: And part of it is because the IHS appropriation was an 8 or $9 billion appropriation inside a $55 billion appropriation which is inside a $700 billion discretionary appropriation.
Lloyd B. Miller: So there's just no way really to predict that.
Neil Gorsuch: How much money are you seeking in this case?
Lloyd B. Miller: One million dollars a year, Your Honor, for three years, each of the three-year contract.
Neil Gorsuch: For basically EMS services in Arizona?
Lloyd B. Miller: Basically EMS services and some of the suicide prevention and subs tance abuse programs the tribe has.
Ketanji Brown Jackson: Did I hear you say that these were three-year contracts? Is that what you --
Lloyd B. Miller: Contracts can be three years.
Lloyd B. Miller: These were three-year contracts.
Ketanji Brown Jackson: With the government?
Lloyd B. Miller: Yes.
Ketanji Brown Jackson: With the IHS?
Lloyd B. Miller: Yes.
Lloyd B. Miller: And they're recurring.
Lloyd B. Miller: So, after three years, you sign up for another three years if you want to.
Ketanji Brown Jackson: And they could be renegotiated at that time?
Lloyd B. Miller: Absolutely, absolutely.
Elena Kagan: And what will you do with that $1 million a year?
Lloyd B. Miller: As a contract recovery under the Contract Disputes Act, Your Honor? If that's the question, then that --
Elena Kagan: What --what services will you provide with that?
Lloyd B. Miller: Oh, yes.
Lloyd B. Miller: Well, the -- the EM S service -- let's take that again -- suffers from being able to hire sufficient personnel.
Lloyd B. Miller: They pay excess overtime, so if they could hire another crew, then they wouldn't be paying that overtime.
Lloyd B. Miller: They would upgrade, constant upgrade I must say, the ambulances driving on country roads.
Lloyd B. Miller: So they would upgrade ambulances, upgrade equipment in the a mbulances, and upgrade the training of the EMT crews.
Lloyd B. Miller: This is just the normal -- normal work of an EMS program.
Lloyd B. Miller: And, most importantly, reduce response times.
Elena Kagan: And do you provide any services to non-Indians?
Lloyd B. Miller: No, Your Honor.
Amy Coney Barrett: Can I ask you what I hope is just a simplistic clarifying question. So am I right that both parties agree -- and the government can correct me if this is not the government's position -- that the costs of collecting third -party income fall under 5325(a)(1) as part of the secretarial amount and what you're arguing is that the costs of spending the income are contract support costs covered by 5325(a)(2)?
Lloyd B. Miller: The -- well, (a)(2), Your Honor, covers overhead.
Lloyd B. Miller: So, with respect to the first half of your question, the cost of providing the EMS program in the first instance
Amy Coney Barrett: No, no, I understood the third-party income question to be divided into collection and spending --
Lloyd B. Miller: Yes.
Amy Coney Barrett: -- and that there was no dispute that collection is covered and that the reason why collection is covered is that it falls under 5325(a)(1) in the secretarial amount and so that what we're tryin g to find is a home for spending, and you say that home is not 5325(a)(1) but 5325(a)(2)?
Lloyd B. Miller: Right.
Lloyd B. Miller: If I may, Your Honor, the -- the program collection activity is an (a)(1) activity.
Amy Coney Barrett: Okay.
Lloyd B. Miller: And we can find where the billing operations are spelled out in the contract.
Lloyd B. Miller: Overhead on the program collection activity is an (a)(2) cost.
Lloyd B. Miller: So, even as to the Secretary, there are two buckets funding the tribe.
Amy Coney Barrett: Okay.
Lloyd B. Miller: The -- the --the program, the activity itself and the overhead associated.
Lloyd B. Miller: But (a)(2), like (a)(3), isn't limited to what comes to the tribe under (a)(1). (a)(2) is limited by the terms of the contract, not by the terms of (a)(1).
Lloyd B. Miller: I know the government's brief on page 2, I think, dices and rearranges the words, but the costs are to support the contract and contract compliance costs.
Lloyd B. Miller: So the touchstone for (a)(2), like (a)(3), is what does the contract say.
Lloyd B. Miller: So the overhead that's covered by (a)(2) and (a)(3) is to support anything that's in the contract, and that contract includes spending program income.
Lloyd B. Miller: And with regard to breaking the bank, by the way, you're only talking about an average indirect cost rate around the United States is 25 percent, although my client's rate was 17 percent.
Lloyd B. Miller: So they lost out on about 17 percent of the program income spending they should have had.
Lloyd B. Miller: That's important.
Lloyd B. Miller: But what's really important under the Indian Self-Determination Act is they couldn't do what IHS could have done.
Lloyd B. Miller: And if I could just take a moment, had IHS been in the situation that the tribe was in, running a $10 million program a year, and IHS had 50 percent program revenue, program income to spend, and then -- and then its own appropriations to spend, 50/50, IHS wouldn't have to take one dime.
Lloyd B. Miller: All of that money would be locally spent to provide care.
Lloyd B. Miller: But, when the tribe comes in, if it has a 25 percent indirect cost rate and we had 5 million from one source, 5 million from another source, 10 million total, 2 and a half billion dollars required for indirect costs, we have to fund some of that 2 and a half million out of the program revenue that came into the tribe.
Lloyd B. Miller: IHS doesn't have that.
Lloyd B. Miller: They get the benefit of the whole 10 million.
Lloyd B. Miller: And the tribe would get the benefit of the whole 10 million if the overhead were reimbursed o n top --
Amy Coney Barrett: But is that part --
Lloyd B. Miller: -- but it's not.
Amy Coney Barrett: Is that partly explicable by the fact that, I mean, you know, the tribes aren't the only ones who get third-party payments, like from Medicare, Medicaid, or private insurers.
Amy Coney Barrett: That overhead is partly built into that?
Lloyd B. Miller: No, the overhead comes in when we -- when we spend the money.
Lloyd B. Miller: I mean, if we spend the money to increase salaries, if we spend the money to add another --
Amy Coney Barrett: No, no, no, but if a hospital got paid, just say not a tribal --
Lloyd B. Miller: Yes.
Amy Coney Barrett: -- medical facility. Well, I'll -- I'll finish that up during the --
John G. Roberts, Jr.: Thank you --
Lloyd B. Miller: But if a hospital got --
John G. Roberts, Jr.: -- counsel. Go ahead.
Lloyd B. Miller: If a hospital got paid Medicare and Medicaid money, the hospital can do anything it wants with it.
Lloyd B. Miller: It's not required -- it's not limited by any federal statute in its use of the money.
Lloyd B. Miller: And if a doctor the same.
Lloyd B. Miller: If the doctor receives money from Medicare and Medicaid, it can use it to pay the -- the scholarship of its son.
John G. Roberts, Jr.: Thank you, counsel.
John G. Roberts, Jr.: Justice Thomas? Justice Alito?
Samuel A. Alito, Jr.: Well, just to follow up on a few questions that were asked earlier, in assessing what Congress thought this whole scheme would amount to, do you think it is illegitimate to consider how much it will cost?
Lloyd B. Miller: I -- I don't -- I don't think anything is illegitimate in terms of considering what Congress might have expected, but I -- I do think we have to look at what Congress did in 1994 --
Samuel A. Alito, Jr.: All right.
Lloyd B. Miller: --in the Act proposed.
Samuel A. Alito, Jr.: So it's not illegitimate --that wasn't an illegitimate line of inquiry.
Samuel A. Alito, Jr.: And the government has been accused of making up a number and trying to smuggle it into the case without record support.
Samuel A. Alito, Jr.: I take it you disagree with their number?
Lloyd B. Miller: Well, I disagree with their number, and today the government said that their number was concocted partially on the assumption that we were talking about overhead associated with services to non-beneficiaries, which we're not.
Samuel A. Alito, Jr.: Do you have a number?
Lloyd B. Miller: We do not have a number.
Samuel A. Alito, Jr.: Thank you.
Lloyd B. Miller: All I know is, for the San Carlos Apache Tribe, it's about a million dollars a year.
Samuel A. Alito, Jr.: Well, do you think in a case involving the interpretation of the statute, the question is what the statute means and what it will mean as applied to -- in all the instances in which it will be invoked or just what it would mean in the particular case that happens to come before the Court?
Lloyd B. Miller: The question I ask myself is what did -- what did Congress intend when it enacted the statute because we're bound by the text of the statute.
Lloyd B. Miller: And Congress in 1994 said that program income was going to be part of the contract, and it knew that the agency had, for more than a decade, also said that program income --
Samuel A. Alito, Jr.: All right.
Lloyd B. Miller: -- was part of the contract, and it wrote the contract support cost provision to be key to the contract.
Samuel A. Alito, Jr.: Thank you.
Lloyd B. Miller: Thank you, Your Honor.
John G. Roberts, Jr.: Justice Sotomayor? Justice Gorsuch? Justice Kavanaugh? Justice Barrett? Justice Jackson? Great.
John G. Roberts, Jr.: Thank you, counsel.
Lloyd B. Miller: Thank you.
John G. Roberts, Jr.: Rebuttal, Ms. Flynn.
Caroline A. Flynn: Thank you, Mr. Chief Justice.
Caroline A. Flynn: Just a few points.
Caroline A. Flynn: So, first, I do want to emphasize at the outset that we have been talking a lot today about the funding provisions in 5325(a) and (m) and how those work together, but there is a separate prohibition that does apply, notwithstanding any other provision of law, and that says that IHS cannot pay costs that are not directly attributable to the ISDA contract.
Caroline A. Flynn: Here, there is an extended chain of causation.
Caroline A. Flynn: The tribe has to first perform services that are eligible for receiving reimbursements, it then has to collect that money, then decide how to spend that money, which may not even be during the same contract period, and then it has to be the kind of expenditure that generates what would otherwise be an eligible contract support cost.
Caroline A. Flynn: That is too extended of a chain to fit within "directly attributable" and so payment of these funds is independently barred.
Caroline A. Flynn: The second thing I want to address, this question of whether when we're talking about the kind of third-party reimbursement income that can trigger this corresponding contract support cost obligation from IHS, there were questions about whether that kind of income includes income from serving non-beneficiaries or just income from serving Indians.
Caroline A. Flynn: And I took my friend from the Northern Arapaho to say that they do consider the program income they're talking about in this case to include both kinds of reimbursement revenue. That is how I understood the arguments to be in this case thus far.
Caroline A. Flynn: But I also took my friends on the other side to say that you do not have to decide that question about whether the kind of reimbursement income that could potentially trigger CSC from IHS includes income from serving no n-Indians.
Caroline A. Flynn: And I would encourage the Court at the very least to reserve that issue and not decide whether that amount of income can include that kind of income stream.
Caroline A. Flynn: There were also questions about our budget estimate in this case, about the repercussions of this case.
Caroline A. Flynn: I do want to clarify that, yes, our estimate is based on -- if you base contract support costs on all kinds of third-party reimbursement income that can come in, and so it is tied to that, but that estimate is tied to the available information we have.
Caroline A. Flynn: We do not have reliable information about how much third-party reimbursement income tribes are bringing in per year, including whether it comes from serving non -beneficiaries or beneficiaries, because IHS doesn't have reason to collect that information in a comprehensive way.
Caroline A. Flynn: But we can look at the value of the claims that have been made so far and we can look to how much third -party reimbursement income IHS comes -- brings in to make estimates. The value of the claims we're seeing so far, we are already facing a claim in the District of Arizona seeking nearly $110 million in additional contract support costs for a single contract year.
Caroline A. Flynn: We're seeing other claims for 40 million for a single contract year and 90 million for another contract year.
Caroline A. Flynn: In one of those cases, the Gila River case, there's a single fiscal year where the tribe -- what the tribe is saying that they are owed in contract support costs is about $48 million, and that -- that's the total including what they were already paid, and that comes close to what they received in the secretarial amount for that same year, which was $51 million.
Caroline A. Flynn: So our prediction that this will eventually overtake the secretarial amount, we think, is sound, and that's in part because of the allegations like those in the San Carlos Apaches' complaint that if they had received an additional $3 million in contract support costs, they would have been able to produce another $5 million in third -party reimbursement income, and that is part of the damages claim that they are seeking against us in this case.
Caroline A. Flynn: I would also say that our estimate about the forward-looking budget impact does not include the value of any of these retrospective judgments that do have a six-year statute of limitations.
Caroline A. Flynn: Finally, just one final point, there's been discussion about what falls within (m)(1) -- sorry -- 5325(m)(1) and what counts as being within the general purposes of the contract.
Caroline A. Flynn: I would -- I understood my friends to be saying it has to be very closely tied to contract services, although there seems to be some expenses, like building facilities, which can be done under ISDA but has to be done under a separate ISDA contract if the tribe wants to fund it that way, but they think that they could fund that using third-party reimbursement income.
Caroline A. Flynn: I would say also, though, that (m)(1) has to be read consistently with 1641(d)(2). This is the provision of the IHCIA that also governs the same reimbursement income, and that provision says that tribes can spend it on any healthcare -related purpose or otherwise to achieve the general objectives of the IHCIA.
Caroline A. Flynn: You have to read those consistently. It can't be that (m)(1) permits -- forbids uses that this other provision permits, and so that's why I do think that the -- the idea that tribes are limited to spending this just on program services cannot be correct.
Caroline A. Flynn: If there are no further questions, we ask that you reverse in both cases.
Caroline A. Flynn: Thank you, Your Honor.
John G. Roberts, Jr.: Thank you, counsel.
John G. Roberts, Jr.: The case is submitted.