IHS Budget: FY 2027 Request, Shortfall, and Facilities Backlog

The President’s fiscal year 2027 budget requests $9.1 billion in discretionary funding for the Indian Health Service, roughly $1.1 billion above the FY 2026 enacted level.¹ That figure is the IHS budget in its narrowest sense: the annual appropriation that funds direct clinical care, referred care from private providers, facilities, and public health programs for more than 2.8 million American Indians and Alaska Natives. It is also, by the federal government’s own estimate, less than half of what the population it serves actually needs.²

What the FY 2027 Request Contains

Inside the $9.1 billion total, $264.8 million is designated for “current services” — the amount required to keep pace with pay increases, medical inflation, and population growth. The largest single programmatic increase, $93 million, goes to the agency’s electronic health record modernization effort, bringing that line to $287 million. Another $84.1 million would staff and operate five new or expanded facilities, and $11.8 million is set aside for two newly recognized tribes, the Lumbee Tribe of North Carolina and the United Keetoowah Band of Cherokee Indians.³

The proposal also asks for $5.6 billion in advance appropriations for FY 2028, so IHS funding is available on October 1 whether or not Congress has finished its regular spending bills.³ The House Appropriations Committee’s version of the FY 2027 Interior bill, passed in June 2026, would provide $8.69 billion for IHS and expand advance appropriations to $6.06 billion, adding sanitation and healthcare facilities construction to the accounts covered.⁴

How Far Short It Falls

A Department of Health and Human Services report estimated that IHS funding covers 48.6 percent of the healthcare needs of American Indians and Alaska Natives.² Per-person spending shows the same picture from another angle. In 2017, the Government Accountability Office found federal spending per person through IHS was $4,078, compared with $8,109 for Medicaid, $10,692 for the Veterans Health Administration, and $13,185 for Medicare.⁵

The National Tribal Budget Formulation Workgroup, which synthesizes recommendations from all 574 federally recognized tribes, submitted an FY 2027 request of $73 billion. That is roughly eight times the President’s proposal and includes $55.9 billion in program expansions across hospitals, referred care, mental health, dental services, and substance abuse treatment, plus $9.7 billion for binding obligations like contract support costs and tribal leases.⁶

When the money runs out, the agency rations care. In FY 2020, IHS-operated programs for purchased and referred care, which pays for services from private providers when IHS facilities cannot deliver them, denied or deferred an estimated $1.1 billion in services for roughly 265,000 eligible patients.² That figure captures only IHS-operated programs; tribally managed programs, which serve about 39 percent of the eligible population, are not required to report denial data.

Why the Shortfall Persists

Unlike Medicare and Medicaid, the IHS is not an entitlement. It is a discretionary line item that must compete for funding in the annual appropriations process, so if demand outpaces the appropriation, the agency has no automatic ability to spend more.⁵

The instability of that process has been almost as damaging as the topline number. The IHS received its full-year appropriation by the start of the fiscal year only once between FY 1997 and the early 2020s, in FY 2006. The rest of the time it operated under continuing resolutions that froze spending at prior-year levels.⁷ That changed in FY 2023, when Congress provided IHS its first advance appropriation. For FY 2024, $5.1 billion was available on October 1, 2023, regardless of whether Congress had finished the regular bills.⁸ The FY 2026 enacted law continued the approach with $5.2 billion in advance funds.⁹

Two fast-growing categories still sit outside that protection: contract support costs, which reimburse tribes for the overhead of running programs they have taken over under self-determination agreements, and Section 105(l) tribal leases, which compensate tribes for facilities used to deliver those programs. Because neither receives advance funding, IHS cannot fulfill those payments during a shutdown or lapse.⁹ The FY 2027 budget scores contract support costs at $2 billion and 105(l) leases at $929 million.³ Lease costs alone grew from $6 million across 37 proposals in FY 2017 to $101 million across 205 proposals two years later.¹⁰

Aging Facilities and the 1993 Construction List

IHS hospitals average roughly 42 years old, more than three times the national average for hospitals.¹¹ A 2022 GAO review found 61 percent of rated IHS buildings were in “fair” or “poor” condition, against an agency goal of 90 percent in “good” or “excellent.” Medical equipment that should be replaced after six to eight years is routinely used for 12 to 16.¹²

Federal law requires the IHS to finish every project on the 1993 Health Care Facilities Construction Priority List before spending construction money on any new facility. Of the original 42 projects, 36 are done. Six remain: the Phoenix Indian Medical Center, Gallup Indian Medical Center, Whiteriver Hospital, Albuquerque West Health Center, Albuquerque Central Health Center, and Sells Alternative Rural Hospital.¹¹ The estimated remaining cost is $6.3 billion; ICT News, citing agency officials, put the broader figure at $8 billion and noted the list includes two hospitals in Montana and Minnesota that are nearly 90 years old.¹³

In February 2026, HHS Secretary Robert F. Kennedy Jr. announced $1 billion from the HHS Nonrecurring Expenses Fund toward these projects, with spending beginning in FY 2027.¹⁴ A first $22 million allocation goes to a new 235,000-square-foot medical center at Santa Ana Pueblo in New Mexico, replacing one of the Albuquerque-area facilities, with groundbreaking planned for 2027.¹³ IHS officials have warned that without additional special appropriations, completing the full list could take another 40 years.

The Sanitation Cut

One of the most contested lines in the FY 2027 proposal is a $93.9 million reduction to sanitation facilities construction, an 87 percent cut from FY 2026.¹⁵ The IHS justified the cut as a way to prioritize direct healthcare services, arguing remaining funds would be used to implement unobligated balances from the Bipartisan Infrastructure Law.³

At a Senate Indian Affairs Committee hearing in May 2026, Sen. Lisa Murkowski of Alaska said clean water and sanitation are “fundamental to preventing illness” and should be treated as essential health infrastructure. She noted some tribal communities still rely on honey buckets and haul wagons for waste disposal, and argued one-time infrastructure law money should not replace sustained base funding.¹⁶

The Medicaid Exposure

The appropriation is not the only money keeping tribal facilities open. Third-party billing, especially Medicaid, funds day-to-day operations at many sites. Medicaid accounts for roughly two-thirds of third-party revenue for tribal health providers, and individual facilities may depend on it for 30 to 60 percent of their operating budgets.¹⁷ Under existing law, the federal government reimburses 100 percent of Medicaid costs for services provided to enrolled American Indians and Alaska Natives at IHS and tribal facilities.²

The One Big Beautiful Bill Act, signed into law on July 4, 2025, mandates roughly $1 trillion in federal Medicaid spending reductions over ten years. Reimbursement rates negotiated between CMS and the IHS remain intact, and Native Americans are exempt from the new work requirements imposed on Medicaid expansion adults, but the law limits patient eligibility overall and reverts enhanced state-specific reimbursement rates for tribal long-term care to standard federal rates. In Arizona, average daily nursing home rates for tribal facilities would drop from $725 to $422.¹⁸ At the House Appropriations hearing, Ranking Member Chellie Pingree said the IHS budget assumes $1.4 billion in Medicaid collections, and that broad eligibility cuts threaten that revenue.¹⁵

Staffing

Even when the money is there, care requires people to deliver it. The IHS operates with a near-30 percent vacancy rate across the agency, and physician vacancies run higher, at roughly 36 percent.¹⁹²⁰ Rural locations, limited provider housing, and pay that often trails the private market have long made recruitment difficult.²¹

In 2025 the situation worsened. A federal hiring freeze issued in January 2025 exempted clinical positions but covered hospital administrators, the staff responsible for billing Medicaid and Medicare and generating the third-party revenue tribal facilities depend on.²⁰ The Department of Government Efficiency issued reduction-in-force notices to 2,200 IHS employees; HHS rescinded them the next day. More than 1,000 IHS employees later left through an OMB buyout initiative.²² By the May 2026 Senate hearing, the agency reported 1,200 fewer employees than two years earlier.²³

In January 2026, the IHS announced what it called the largest hiring effort in agency history. By the Senate hearing, the agency had roughly 300 open job postings and reported more than 10,000 applications.²³

How the Budget Is Built

The request that lands in Congress each year is shaped through government-to-government consultation. Each fall, the 12 IHS Area offices hold work sessions with tribal officials to identify regional priorities. Two tribal representatives from each Area serve on the National Tribal Budget Formulation Workgroup, which meets in February or March to synthesize those priorities into a national recommendation.²⁴ Recommendations are compiled into a “Budget Book” and presented to HHS and the Office of Management and Budget in the spring.²⁵

The IHS submits its formal request to Congress by the first Monday in February for the fiscal year beginning the following October 1. Congressional review runs through the House Subcommittee on Interior, Environment and Related Agencies and the Senate Committee on Indian Affairs, among others.²⁶ More than 60 percent of the final appropriation is administered by tribes themselves through self-determination contracts or self-governance compacts under the Indian Self-Determination and Education Assistance Act.²

One further limit is worth naming, because the IHS is often mistaken for insurance. It is not a comprehensive insurance program. Among people under 65, those identifying as American Indian or Alaska Native alone are three times more likely to be uninsured than white Americans, 21 percent compared with 7 percent, and individuals relying solely on IHS often face significant gaps in care. Urban Indian Health Programs, despite serving a growing share of the Native population living off reservations, receive only about 1 percent of the total IHS budget.²⁷

1
HHS. FY 2027 Budget in Brief
2
ASPE. IHS Funding Disparities Report
3
IHS. FY 2027 Congressional Justification
4
NCUIH. House Advances FY 2027 Interior Bill
5
Mercatus Center. Increasing Funding for Indian Health Service
6
NIHB. FY 2027 NTBFWG Budget Book
7
Congressional Research Service. Indian Health Service Advance Appropriations
8
IHS. Advance Appropriations Implementation
9
IHS. Dear Tribal Leader Letter, October 2025
10
IHS. Section 105(l) Lease Summary
11
HHS. IHS Testimony on the FY 2027 Budget
12
GAO. IHS Health Care Facilities Report
13
U.S. News. Digging Out of Decades-Old Construction Backlog
14
NCUIH. HHS Secretary Announces $1 Billion in Infrastructure Investment
15
Native News Online. Bipartisan Support for IHS FY 2027 Budget Increases
16
Senate Committee on Indian Affairs. Murkowski Raises Tribal Priorities at FY 2027 Budget Hearing
17
KFF Health News. Tribal IHS Medicaid Cuts Underfunding Fallout
18
Forvis Mazars. How OB3 Medicaid Changes Affect Tribal Health Organizations
19
IHS. IHS Launches Largest Hiring Effort in Agency History
20
Time. Tribes Federal Funds Medical Care DOGE Cuts
21
GAO. IHS: Ongoing Challenges Filling Provider Vacancies
22
ICT News. DOGE Early Retirement Offers Slash IHS Workforce
23
Native News Online. Tribal Health Concerns at Senate Budget Hearing
24
IHS. IHS Tribal Consultation Policy
25
NIHB. Budget Formulation
26
IHS. Annual Budget
27
KFF. Key Data on Health and Health Care for American Indian or Alaska Native People