that quote men dates that the secretary shall pay the full amount of contract support costs incurred by tribes in performing their contracts end quote this case will determine if the indian health service required to reimburse the tribe for its c s e on all of the federal program that it compact to perform including his generation of so called program income that is revenues from medicare medicaid and rd party insurers if the tribes earning and collection of such program income is included in the compact and federal program then the tribes should prevail under the plain language of section eighty three i think there are three main points that i'd like to make this morning st the tribes activities to generate program income are unquestionably part of the federal tribes construction of the act we believe is compelled by the plain language of a two and a three in five thousand three hundred and twenty five dollars but even if it's not it's certainly a reasonable construction of the act and under this court's decision in the muskogee case any reasonable construction of the act events by the tribe must be adopted the the funding agreement clearly requires us to both earn and collect programming income it requires us it states all medicare medicaid and other programs income earned by the tribe we have to earn it then we collect earning that programs and come takes a lot of work and a lot of experience and a lot of overhead the same expense and overhead that is incurred by the tribe isn't performing work for people who are not covered by medicare medicaid or other rd party insurance  let's assume that at i h s is not running medical services that the tribe is running the services that they have a contract with i any medicare medicaid compliance cost yourself well the reason is i think there are several reasons one is as a practical matter there's no accountability what we've found is that this will send us a check but they won't necessarily send us the right amount of money secondly there's a substantial delay in the i guess processing of these funds and that actually harms the you're both in the same page of it because it's this is just a fact question i'm trying me trying to figure out how how these how this works website state that we go back to a time when i h s was running all the health services and so i hate jackson i'm just going to use really simple numbers here right stats was receiving a one thousand dollars and then it was spending a one thousand dollars on on the tribe and then it was also receiving two hundred dollars from medicare medicaid program and it's that or was it spending all two hundred dollars of that on the trial or was it spending part of that on the tried and spending part of that on compliance costs that come with dealing with medicare and medicaid my understanding of the law is that under the union health care improvement act section six hundred and forty one dollars c i h s was required to spend program income on specific things one facilities because the indian health care facilities nationwide were to leopard hated and to expanding and improving health care services now what what  just was able to generate in order to to cover its costs came from a separate fund called direct operations and that's explained i think in great detail in the twenty six we're entitled to the same amount of money from the same as the secretary would have provided for the operation of this program and it's absolutely clear that the se lot of money to generate program income and that the secretary is reimbursed for just as overhead costs from a separate bucket we simply want to substitute contract support costs to us the tribe for that separate budget that allows the secretary to comply was one thousand six hundred and forty one and in his or her use of those funds and also to cover costs of earning a program income is certainly to be directly attributable to our contract is required by the compact joint appendix forty and by the funding agreement joint appendix forty nine i including these costs as part of c s c or in the program costs right i mean you're relying on your your agreement to exclude five thousand three hundred and twenty six and to say that that this is contemplated but there's a very detailed calculation of direct and indirect costs it doesn't include any of these costs so even if you even putting aside your statutory agree you know statutory arguments why aren't you barred from making this those calculations in stone what it says is well agree to follow the c s e manual and i'm quoting now from page fifty two of the joint appendix to the extent it is consistent with the he questions from my colleagues ok thank you complicated scheme but if i'm tracking it correctly one of the arguments the tried may is that these costs fall within the secretarial any funds that are specifically or functionally related to the provision of services and benefits to the indian tribe and that seems bunk functionally related to the provision of those funds provided under the under the terms of the self determination contract then you shall not be less appropriate secretary would have otherwise provided for the operation of the programs so in other words  as amount specified under five thousand three hundred and twenty five dollars a one which is the secretarial amount and amounts for support costs which are the c f c s and then it has this including language which seems to broaden seems to broaden the scope of what the secretary is located to f e for the program plans or would that be barred by the statutes limits on duplications or other restrictions that are in five thousand three hundred and twenty five i mean is it possible for them to contract for that as part of c and they have they have assumed that responsibility and they're getting reimbursed for that as part of the secretarial amounts so there's no the statute bar contracting for those for reimbursement of those fees would it prohibit i understand you're saying it's not required by the statute but would they be prohibited from contracting for that reimbursement well questions and one of them unfortunately for me at least has a little bit of math so i'm going to i'm going to start with the other one  doctors have compliance costs when they bill medicaid back in like in the old days when i h s was running the services on costs what exactly exotic you know well as i understand it the federal government sometimes requires audits sometimes they require more complex that their compliance costs are something like thirty percent of the money they actually received from the contract and i'm not i'm not i don't care whether it's thirty percent is right or twenty five or fifteen  but there seems to be a recognition that when when you're getting money from the federal government the federal government imposes some requirements that cost you money some compliance requirements and i'm sure that every doctor in america who fills medicaid passed to satisfy some compliance requirements and i'm sure that satisfying those compliance requirements cost them some time and money and so i would imagine that i h s had compliance requirements back when it was running the services on the ground and when it was billing medicaid and when it was receiving money from i don't really know how they couldn't have had some compliance costs that went with billing medicaid so my st question was  the fees that med medicaid and medicare pay they're based not just on the direct health services that are being provided but they're also based on compliance costs so here's here's  my again and at the risk of showing my lack of math skills here's my math question back when i h s was running the services on tribal lands let's say there was one year where and i'm going to use really small really simple numbers my own state here let's say there was one year where i h s build medicaid for two thousand dollars ok and medicaid then writes them a check for two thousand dollars and there is an obligation on i h s to spend that money on that tried now here's my question let's say the let's say that complying with medicaid costs about thirty percent of what you get from medicaid my guess is that ate as would have then spent one thousand four hundred dollars of that two thousand on providing direct health services and it would have spent six hundred that two thousand dollars on the compliance costs that come with having to deal with medicaid and medicare which to be frank is not something i would wish on my worst enemy if that's the case if that's how it worked then i think that the tribe is wrong here i think they're getting and assuming all else is is the same and constant they're getting two thousand dollars the next year for medicaid and they should spend one thousand four hundred of that on direct health services and they should spend six hundred of that on compliance costs and to the extent they chose to spend all two thousand of the two thousand on direct health services and they don't have the money that extra six hundred dollars left to spend on the compliance costs well they they didn't do it the way they were supposed to do and they spent too much so that i think you're right if that's how it all works but here's my question for you back in the old days when i just was running this health services themselves maybe it was the case that when i just build medicaid for two thousand dollars i h s turned around and spent all two thousand of that on direct  that's the way it used to be then this new system does seem like it's worse off for the tried there six hundred dollars less dollars being spent on direct health services and i suppose if if this is the thing that happened that back in the old days medicaid had spent all two thousand on direct health services mean that's extra six hundred dollars compliance costs had to come from somewhere it's possible i access just found that money somewhere else out of the treasury out of it's you know some other account and spent it and if that's what was going on my concern is that the tribe is worse off when it has made a choice to provide health services itself rather than letting i run the show so i guess i was a really long question but there's really one small part of it but i wonder if you could help me with back in the old days when i just was providing health services itself and it billed medicaid for two thousand dollars did it spend all of that on direct health services or did it spend part of that on direct health services and the rest of it on compliance costs well i'm really i not sure i really i mean i can't answer that question sir direct because i'm not exactly sure how you know how that works but i do know that u not really it's not tied to any specific cost and that's that is what that's the crux of the problem with with their position it's not it's just not this is not the way the statue works to it could at least try to negotiate for a claim to get the compliance costs that come with billing medicaid they didn't do it here you say but they could at least try that to do that negotiation if they could prove what they need to prove but i thought you had told judge ralph that they're not allowed to do that did i misunderstand one of those two answers  mr fry we'll give you a few minutes if you very much i can answer judge walker's question back in the old days i spent one hundred percent of its program income program income on either facilities or expanded health care not overhead so your hypothetical judge walker i think is correct we are getting less for our compact ing efforts than  the government would have received under the old regime and where it got that money is from a separate book at the direct operations bucket which is under  nine construes that include including language to be in addition so yes we agree with the thought of judge katz s and in that respect and  in the including phrase refers to services and benefits which strike me as a little bit different than earnings can you help me with that concern i will certainly try your honor  l begins with the secretary shall provide funds including contract support costs including any funds that are specifically or functionally related to the provision of services so the funds are related to the provision of the services in the provision of the services or the provision of medical services to people covered by medicare medicaid in my view a reading of that  getting out of control with their indirect costs rates it turns out they're roughly half of what the indirect cost rates are for federal agencies state agencies universities and others so that's on page twenty six of that particular study the thirty one point nine one percent isn't just a lawyers abstraction it's an agreed upon figure that the office of management and budget recognises is a necessary expedient you can't go and nickel and dime different operations to find you know absolute specificity in precise precision to overhead costs you don't we don't and i just doesn't have separate staff that provide services to people covered by medicare medicaid it's all within our organization and we