F Steele

Document Type



Indian Health Service (IHS), a component of the Health Service Administration, Public Health Service, is the principal provider of medical care and public health services to nearly one-half million American Indians and Alaska Natives. In the fiscal year 1975, Congress appropriated some $230 million for IHS personal health services, an amount believed to fall short of need by $70 million. The objective is to close this gap with alternative funding, such as Medicare and Medicaid. Macro Systems, Inc. (MSI) was contracted to analyze and forecast collection procedures, recapture costs, net revenues realized, and other issues raised by the implementation of a collection program. MSI examined potential revenues, projected costs of capturing these revenues, and the non-financial ramifications of implementing and planning to collect third-party reimbursements. The study was conducted over a period of seven months, beginning in July 1974. It was carried out in three phases: 1) initial estimates of potential revenues available from Medicare and Medicaid; 2) extensive fieldwork in all Area Offices and 18 Service Units; and 3) data analysis and report writing. The fieldwork was conducted for three months in every area office and 18 Service Units. A representative mix was chosen with respect to size and type of facility, average daily patient load, outpatient visit capacity, health status of target population, rural/urban nature of the environment, and political posture of the Tribes within the Service Unit. Comprehensive interview guides were developed for the Area Offices, Services Units, and Medicaid agencies. Examples of all interview schedules, questionnaires, and projections, are contained in this report. IHS had little information about the true income distribution of the target population because income has never been a criterion for determining patient eligibility for IHS services. Where such data gaps occurred, MSI used inferential measures and often subjective judgment, to construct reasonable estimates. MSI found that contract care by IHS would be unaffected by the pending legislation, but that some opportunities do exist to offset current contract care costs more effectively, even without legislation. Sources other than Medicare and Medicaid were considered, but were found to be much less significant except in a few localized situations. With respect to Medicare reimbursements for direct patient care and field health, MSI found that potential revenues are quite limited, principally because relatively few people in the target population are eligible for Hospital Insurance Benefits unless they pay a premium of $512.40 a year. The analysis indicated that gross Medicare collections would average less than 2% of direct patient care expenditures for the IHS system as a whole. This is equivalent to potential gross revenues of slightly less than $1.5 million. Although this is not large enough to justify a program to collect both Medicare and Medicaid reimbursements alone, there is no reason why these potential revenues should not be pursued as part of a larger effort to collect both Medicare and Medicaid reimbursements. Medicaid reimbursement is much more complex because it is administered by state plans that vary from state to state. MSI projects gross Medicaid collections ranging from 12% or $15 million to 19% or $22 million. There are significant costs that must be expended to collect such revenues. A more sophisticated accounting system, incorporating a claims processing system, will have to be developed for IHS as a whole. The implementation of such a program in 73 Service Units would entail nonrecurring costs of about $800,000 before collection begins and recurring costs of personnel of about $4.5 million. Finally, there are the non-financial issues of termination and Native management of the system. The issue of termination arises from the perception held by some of the target population that the Federal government is more trustworthy than any state or county government and any hint of a delegation of responsibility by the Federal government will eventually lead to termination of the coverage. Native management is an issue because there is reliance on the Federal government and simultaneous mistrust and desire to be independent of it. Conclusions: The study reviews five (of many) alternatives in terms of initial investment, cumulative five-year net revenues, and five-year return on investment. The five alternatives range from 73 Service Units to 7 Service units with net revenues from $26 million to $56 million. The choice among these alternatives depends on the relative importance attached to maximizing net revenues as compared to minimizing initial investment. Non-financial considerations, such as termination and delegation, may also influence the decision strongly.

Publication Date



Indian Health Service, Staff Office of Planning, Evaluation and Research, Rockville, MD 20857 (E-49).