National Institute of Health A Havasupai woman receives injection from a Public Health Service officer, 
Grand Canyon, Arizona, late 1960's
There is near universal agreement: the Indian Health Service needs more money. At the National Indian Health Board Consumer Conference last week several members of the U.S. Senate and House were critical of the historic under-funding of IHS. These were Democrats, Republicans, some representing Indian country constituents, others from districts with no reservations and few tribal members. Yet they communicated the same message: the United States made a health care promise to Native Americans and it’s wrong to fund a system with substantially less money than what is spent per person on health care for federal prisoners.
The Indian health system’s funding is so low that many patients are counted as part of the uninsured population in government data.
The Senate Finance Committee’s health reform concept paper put it this way: “The IHS itself has stated that its funding does not allow it to provide all the needed care for eligible Indians. As a result, some services are ‘rationed,’ with the most critical care given first. … The reality of this under-funding is that money for contract health services does not last the entire year, forcing IHS to limit services to circumstances involving a ‘loss of life or limb’ circumstance. This predicament is so common in Indian Country that many tribal members fear that if they need care after June, they will be forced to go without.” http://finance.senate.gov/healthreform2009/
The Obama administration at least added 13 percent to its IHS funding request. But it’s a small step and neither the Executive Branch nor the Congress has made funding parity a priority, or even a proposal.
As a result, many tribes have stepped up and contributed their own money to improve health care in Indian Country. This ranges from paying extraordinary medical bills of tribal members to purchasing health insurance.
Hurrah. But this is where our story takes a strange twist: The government’s response to those innovative approaches is to treat this generosity as a taxable event. The IRS wants 1099 forms sent to individual members who benefit from a tribe’s health care contribution. Given that the contributions are needed to make up for a federal deficiency, perhaps a tax bill should be sent to the U.S. government instead.
The Pechanga Tribe Band of Luiseno Indians in California studied its heath care needs for two years, and then enacted a mandatory group coverage policy for tribal members. “This has led to measurable improvement in the physical health of our tribe,” testified Mark Macarro, the band’s chairman, before the Senate Indian Affairs Committee last week. “Earlier this year, we opened a new exercise facility that both contributes to and facilitates the health and wellness of our tribal citizens.”
However the IRS asked the tribe to demonstrate how the program was “need” based – and if it didn’t, the IRS would consider these taxable benefits.
“It appears to us that the IRS is interpreting ‘need’ as meaning only ‘financial’ need,” Macarro said. “From our perspective, this makes absolutely no sense. The Pechanga government has stepped in where the federal government has fallen short for our people.… Pechanga has decided not to wait on the federal government to fulfill its trust obligation to our people.”
The basic issue is how the IRS interprets its “general welfare” exclusion. Sarah Ingram, the IRS commissioner for Tax Exempt and Government Entities, said there is a difference in the law between those who work for tribes as employers and tribal members. “Where there is no employer involved, the (tax) Code contains no provision that would allow a tribal member who is not a tribal employee to exclude the value of tribally-provided health care coverage,” she said. 
Images from the History of Medicine. Celebration at the opening of a new Indian Health Service Hospital at Kotzebue, Alaska, c.1961
There are two ways to fix this mess. Congress could clarify the law (the route the IRS would prefer). Or a “revenue ruling” could easily fix this problem administratively, testified Scott Taylor, a professor of law at the University of St. Thomas in Minneapolis. He cited other examples of such a governmental exclusion, including the Veterans Administration and Medicare.
For once, it seems, there ought to be enough consensus in Washington to force the easy route. This is common sense. The IRS ought to get a call from the White House and the Treasury Secretary and be told to resolve this issue quickly.
But there is another alternative: Those who decry the under-funding of Indian health could come up with real appropriations and make the system whole.
Mark Trahant is the former editor of the editorial page for the Seattle Post-Intelligencer. He was recently named a Kaiser Media Fellow and will spend the next year examining the Indian Health Service and its relevance to the national health reform debate. He is a member of Idaho’s Shoshone-Bannock Tribes.