GENERAL STATEMENT

(in dollars)

+----------------+------------+-------------+-------------+-----------+
|                | FY 2003    | FY 2004     | FY 2005     | Increase  |
|                |            |             |             |           |
|                | Actual     | Enacted     | Estimate    | Or        |
|                |            |             |             | Decrease  |
+----------------+------------+-------------+-------------+-----------+
| Health         | 2,4        | 2,          | 2,          | 8         |
| Services       | 75,916,000 | 530,364,000 | 612,824,000 | 2,460,000 |
|                |            |             |             |           |
| Facilities     | 3          | 391,350,000 | 354,448,000 | (36       |
|                | 73,745,000 |             |             | ,902,000) |
| **Total, BA:** |            | \$2,        | \$2,        |           |
|                | \$2,8      | 921,714,000 | 967,272,000 | +\$4      |
| Reimbursements | 49,661,000 |             |             | 5,558,000 |
|                |            | 598,662,000 | 598,662,000 |           |
| Special        | 5          |             |             | 0         |
| Diabetes       | 91,697,000 | 150,000,000 | 150,000,000 |           |
|                |            |             |             | 0         |
| **Total,       | 1          | \$3,        | \$3,        |           |
| Prog.Level**   | 00,000,000 | 670,376,000 | 715,934,000 | \$4       |
|                |            |             |             | 5,558,000 |
|                | \$3,5      |             |             |           |
|                | 41,358,000 |             |             |           |
+----------------+------------+-------------+-------------+-----------+
| FTE            | 15,020     | 16,145      | 16,251      | +106      |
+----------------+------------+-------------+-------------+-----------+

The Indian Health Service program is delivered to a service population
of more than 1.6 million American Indians and Alaska Natives through
155 Service Units composed of 594 direct health care delivery
facilities, including 49 hospitals, 231 health centers, 5 school health
centers, and 309 health sta­tions, satellite clinics, and Alaska village
clinics. Within this system, Indian tribes deliver IHS funded services
to their own communities with just over 50 percent of the IHS budget in
15 hospitals, 172 health centers, 3 school health centers, and
260 health stations and Alaska village clinics. Tribes who have elected
to retain the federal administration of their health services or to
defer tribal as­sumption of the IHS program until a later time receive
services in 36 hospitals, 59 health centers, 2 school health centers,
and 49 health stations. The range of services includes traditional
inpatient and ambulatory care, and extensive preventive care, including
focused efforts toward health promotion and disease prevention
activities.

With the funding received in FY 2005, the IHS will address the following
program elements:

-   Staffing for newly constructed facilities at Westside, AZ, Dulce,
    NM, Pinon, AZ, Metlakatla, AK, and Idabel, OK (\$23.1 million and
    106 FTE).

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-   Construction funding to complete the Red Mesa, AZ Health Center;
    Zuni, NM and Wagner, SD Staff Quarters, and Sisseton, SD Health
    Center.

-   Sanitation Facilities Construction funding to provide water, sewer,
    and solid waste facilities to an approximately 200 additional first
    service homes and upgraded service to approximately 1,800 previously
    serviced homes (+\$10 million).

-   Federal pay costs increases for civil service, commissioned corps,
    and tribal program personnel (\$36.2 million).

-   Contract health services to increase access to care not available in
    the direct service programs (\$17.9 million).

-   Unified Financial Management System to provide IHS' share of UFMS
    costs and administrative applications (\$4.5 million).

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-   Health Promotion / Disease Prevention and Epi Centers to expand
    Director's HP/DP initiative (\$2 million) and to ensure broader
    access in Epi Centers (\$2.5 million).

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-   CHA/P Alaska to hires additional employees and training needs (\$2
    million).

[United States Government and Indian Nations]{.underline}

The provision of Federal health services to American Indians and Alaska
Natives is based on a special relationship between Indian tribes and the
United States provided by Article I, Clause 8, of the United States
Constitution. Numerous treaties, statutes, and court decisions first
expounded in the 1830's by the U.S. Supreme Court under Chief Justice
John Marshall have reconfirmed this relationship. Principal among these
is the Snyder Act (25 U.S.C.) of 1921 that provides the basic authority
for most health services provided by the Federal Government to American
Indians and Alaska Natives.

In order to develop stronger partnership between the government and
tribal governments, the Department of Health and Human Services and IHS
have conducted regional meetings with tribes on an annual basis since
1995. The meetings fostered new partnerships between the government,
State, and Tribes to meet the health needs of Indian people.

[The Indian Health Service and Its Partnership with Tribes]{.underline}

For more than 120 years, the responsibility of American Indian and
Alaska Native health care passed among different government branches. In
1955, the responsibility for providing health care to American Indians
and Alaska Natives was officially transferred to the Public Health
Service (PHS).

In the 1970\'s, federal Indian policy was re-evaluated by the Nixon
Administra­tion, and the Indian self-determination policy was adopted.
This policy em­phasizes tribal administration of Federal Indian programs,
including health care. Self-Determination does not lessen any federal
treaty obligation, but provides an opportunity for tribes to assume the
responsibility of providing health care for their members.

The Indian Self-Determination and Education Assistance Act of 1975, as
amended, and the Indian Health Care Improvement Act of 1976, as amended,
gave new opportunities and responsibilities to the IHS and tribes in
delivering care. These included specific authorizations for providing
health care services to Indian urban populations, an Indian health
professions program, and the ability to collect from Medicare/Medicaid
and other third party insurers. Under the Indian Self-Determination Act,
many tribes have assumed the administrative and program direction roles
that were previously carried out by the Federal government. Tribes
through Self-Determination contracts or Self-Governance compacts
administer over one-half of IHS resources. The IHS administers the
remaining resources and manages those facilities where tribes have
elected not to contract or compact their health programs.

To continue strengthening the federal-tribal partnership, IHS
implemented a new budget formu­lation procedure beginning with FY 1999
integrating the Government Performance and Results Act (GPRA), Public
Law 93-638, and annual budget formulation into an iterative process that
gives local I/T/U more opportu­nities for annual budget policy input and
review. This process was continued in developing the FY 2005 budget
request. Work sessions in all 12 Areas initiated the FY 2005 formulation
process and established the health priori­ties with associated budget
priorities on which the FY 2005 budget is based.

[The Mission, Goal, and Vision]{.underline}

The mission of the agency is to raise the physical, mental, social, and
spiritual health of American Indians and Alaska Natives to the highest
level, in partnership with the population served.

The Director of the IHS has articulated a vision for the Agency to raise
the health status of Indian people to the highest level possible, while
reinforcing the spirit and principles of self-determination. This vision
strongly supports Tribal and Urban Indian partnerships with the IHS with
healthy AI/AN communities being the center piece. The IHS vision is to
continue to be the best primary care, rural health system in the world.
A system that, with tribes, continues its goal of assuring that
comprehensive, culturally acceptable personal and public health services
are available and accessible to the service population. To reach its
goal, the clinical program is made up of many separate activities
including those focused on maternal and child health; fetal alcohol
syndrome; diabetes; alco­holism; mental health; emergency medical
services; community health represen­tatives; hepatitis B; dental
services; and many others. These programs possess curative and
preventive components to a degree unparalleled in any similar program.
In addition to these clinically based programs, the Agency also supports
a community based environmental health program, sanitation facili­ties
construction program and health facilities construction program.

In addition, various health care and referral services are provided to
Indian people in off-reservation settings through 34 urban programs.
Another inte­gral part of the program is the purchase of services from
non-IHS providers to support, or in some cases in lieu of, direct care
facilities. This Contract Health Services program represents
approximately 17 percent of the IHS Budget.

[Service Units]{.underline}

Service Units, local administrative units, serve a defined geographic
area and are usually centered on a single federal reservation in the
continental United States, or a population concentration in Alaska.
Within these 153 administrative units, health care is delivered through
219 health centers, 7 school health centers, 123 health stations,
170 Alaska village clinics, and 49 hospi­tals by tribally and federally
operated Indian health programs.

# Area Offices

Twelve Area Offices provide resource distribution, program monitoring
and evaluation activities, and technical support to all operations
whether IHS direct or tribally operated. They serve to support the
Service Units and their points of service delivery.

[Headquarters]{.underline}

The Headquarters operations are determined by statutes and
administrative requirements set forth by the Department of Health and
Human Services, the Administration, and Congress. Headquarters is
involved in formulating and im­plementing national health care
priorities, goals, and objectives and works closely with DHHS and Tribes
in this area. It is involved in budget and legislative formulation,
responding to congressional inquiries, consulting with Tribes and
interacting with a number of governmental entities and organizations. It
provides Area Offices and Service Units with gen­eral program oversight
and direction, policy formulation, and resource distri­bution. It
provides expert technical expertise, maintains national statis­tics and
project trends and needs for the future.

## ACCOMPLISHMENTS

Since its inception in 1955, IHS has demonstrated the ability to
effectively utilize available resources to improve the health status of
the American Indian and Alaska Native people. During the past 10 years
(1987-1989 to 1997-1999), dramatic improvements in mortality rates were
realized including:

-   Infant mortality reduced 31 percent

-   Accidental deaths reduced 9 percent

-   Homicide deaths reduced 13 percent

-   Maternal mortality reduced 34 percent

-   Tuberculosis mortality rate reduced 53 percent

During the past 5 years major strides have been made in reducing
traumatic injury among American Indians through the implementation of a
broad array of public health measures. These measures include injury
surveillance; extensive training for community health practitioners,
broad-based community coalitions and implementation targeted
interventions. Over the past thirty years, American Indian and Alaska
Native death rates have declined nationally more than fifty percent. The
IHS Injury Prevention Program Plan describes the necessity of building
basic tribal capacity in order to institutionalize change. Injury
Prevention is one of the Agency's key health initiatives. Since 1997,
IHS has fostered the development of tribal injury prevention programs
toward identifying community-specific injury patterns and in
implementing targeted injury intervention projects. Annually, more than
300 tribal health and IHS personnel are trained in injury prevention
practitioner skills. These people are working in their communities to
reduce the incidence of severe injury and death. Although significant
progress has been made, many reservations continue to experience injury
death and disability at rates 2‑5 times higher than other Americans do.

A methodology for measuring health needs of tribes and Indian people was
completed in FY 2000 in fulfillment of Congressional direction to IHS. A
national tribal work group did an economic analysis based on actuarial
modeling by a health economics firm. Additional technical support was
provided by the Agency for Health Care Research and Quality staff and
IHS staff. This analysis provided the tribal and federal Indian health
policy makers with a method of estimating the costs of medical services
for the American Indian population in comparison to a mainstream health
benefit package available through the Federal Employees Health Benefit
Program (FEHBP). This method known as the FEHBP Disparity Index (FDI)
actually measures equivalence and/or disparity of IHS programs with the
FEHBP.

In 2004 and 2005, the IHS will continue to focus on strengthening
business office management practices including provider documentation
training, procedural coding, processing claims and information systems
improvements. In FY 2002 and FY 2003, IHS wide efforts to improve each
hospital's capability to identify patients who are eligible or may
become eligible for third party reimbursement continued. A major part of
this initiative includes the identification of all children who may be
eligible for participation in the Children's Health Insurance Program
(CHIP). For FY 2004 and FY 2005, the IHS will continue working with
Center for Medicare and Medicaid Services and the State Medicaid Offices
to help ensure the success of this effort.

[President's Management Agenda]{.underline}

1\. Strategic Management of Human Capital \-- The IHS' reshaping of its
organization continues to rely on the final recommendations of the IHS
Restructuring Initiatives Workgroup (RIW). The RIW, composed of sixteen
Tribal Leaders and four senior IHS officials, included in its final
report detailed restructuring and consolidation options on six (6)
administrative functions. These options demonstrate a shift of resources
from administrative systems to program delivery.

The restructuring plan and hiring controls reflect a commitment to
reducing administrative FTEs and meeting apportioned reduction target
within the overall administrative FTEs. Organizational delayering plans
are in place and address elimination of management layers that impede
the decision process. The Director, IHS, charged a special group to
formulate restructuring options that will delayer, streamline
Headquarters and ensure greater accountability and leadership.

The IHS is moving its formal workforce planning project to the
implementation stage, with an emphasis recruitment and retention of
health care professionals. This latter activity is focusing on
maximizing all available recruitment and retention tools, i.e., IHS
scholarship and loan repayment programs.

Performance plans that support the IHS Director's contract with the DHHS
are in place for all senior managers and will be included in all IHS
staff plans in CY 2004.

2\. Competitive Sourcing \-- The central focus of competitive sourcing
in the IHS is the continued implementation of Public Law 93-638, the
Indian Self-Determination and Education Assistance Act, as amended. To
date, approximately 52 percent of the appropriation to the IHS is
contracted or compacted to Tribal governments, including approximately
2,000 employees under special purpose IPAs and memoranda of agreement.

3\. Improved Financial Performance \-- The IHS primary effort to improve
financial performance is its participation in the HHS-wide consolidation
of financial management systems. IHS is also developing a suite of
financial applications that will complement the core systems of UFMS,
including applications to account for Fixed Assets, Purchasing, and
Inventory. The IHS obtained an unqualified audit opinion on its FY 2001
and 2002 financial statements and looks forward to the same for FY 2003.

4\. Expanded E-Government \-- Indian Health Service's request includes
funding to support the President\'s Management Agenda e-Gov initiatives
and Departmental enterprise information technology strategic
initiatives, i.e., UFMS, e-grants, HR automated systems, etc.

5\. Budget Performance Integration \-- The Budget Performance
Integration is addressed through the GPRA Performance Plan/Report
section.

[Research Coordination Council]{.underline}

The IHS does not have funding specifically designated for research, as
defined by the Council and relies on the coordination of activities with
the other Operating Divisions within the Department of Health and Human
Services to address many of the American Indian and Alaska Native
research needs. The IHS coordinates research priorities in consultation
with the other HHS Operating Divisions and the American Indian and
Alaska Native Tribes, collaborates on research and evaluation projects,
and participates in surveys. Through participation on the Research
Coordination Council (RCC), the agency has received support in
developing an IHS Research Agenda through which the other Operating
Divisions can assist the IHS in carrying out research, demonstration,
and evaluation activities aligned with the Secretary's and President's
Priority Areas. IHS participation on the RCC has helped identify many
areas of joint interest and potential collaboration.

The activities and recommendations made by the RCC workgroup encourage
the expansion of research collaboration with the IHS and better
coordination by agencies to attract underrepresented minorities into the
research field. A number of activities are in process at this time
through partnership with Tribes and other agencies such as NIH and CDC.
For example, through partnerships with Tribes, the NIH and IHS
established eleven Native AI/AN Research Centers for health. These
Centers will provide research and training opportunities for AI/AN
researchers. The IHS will continue to work with the RCC to ensure
coordination of the Research, Development and Evaluation efforts in FY
2005 and beyond.

# Special Concerns

Within the IHS program, there are certain categories of health
conditions that are of special concern. The proposed budget request for
Contract Health Services, Health Promotion and Disease
Prevention/Epidemiology Centers, Sanitation Construction and Diabetes
funding will address specific disease entities identified as priority
areas by the I/T/U. These diseases are associated with much of the
disparities in health status for the American Indian and Alaska Native
population. Investments in public health infrastructure for Pay Costs
and Staffing for New Facilities will also address the health priority
problems.