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Oregon Set To Say Goodbye To Its Doomed Health Care Exchange

In 2011, with bipartisan support from both Democrats and Republicans, Cover Oregon was ushered in as the vanguard of the state based healthcare exchanges encouraged by the Affordable Care Act. Instead of resisting the Obamacare mandate, the Oregon legislature doubled down on Obamacare, with the encouragement of our Democrat Governor, former ER doctor John Kitzhaber. Despite innumerable warnings from grassroots activists that the project was doomed to failure, most Republicans in the legislature were persuaded to go along. Now, Oregon is saying goodbye to the terminally ill Cover Oregon, after millions in wasted taxpayer money, FBI investigations, lawsuits and political fallout that will be felt for years to come.

Media reports in recent months have detailed numerous fundamental flaws in the project, painting a picture of overall incompetence and poor executive management. Now, according to KATU News, Oregon has little choice but to move to the federal exchange:

Oregon, once expected to be a national leader in the federal health care overhaul, on Thursday moved to become the first state to dump its troubled online health exchange and use the federal marketplace instead.

A top Cover Oregon official, Alex Pettit, said fixing the existing system would be too costly at an estimated $78 million, would take too long to implement, and would be too risky. The state's site still isn't fully functional seven months after a failed launch.

Pettit said switching to the federal system would cost $4 million to $6 million.

Speaking of money, the real kicker is that Cover Oregon has no plans to return the unspent $57 Million of the total $305 Million in federal funds granted to help create the healthcare exchange.

Cover Oregon has been an abject failure in its core mission - to be a portal for folks to find affordable private insurance plans. According to the AP, so far about 240,000 Oregonians have enrolled in coverage through Cover Oregon. More than 69,000 of those enrolled in private health plans, while 171,000 enrolled in Oregon's Medicaid program, the Oregon Health Plan.

Of course, the Governor and legislators who approved this mess are in full damage control mode, lashing out at the website contractor when the the evidence clearly indicates the issues stem largely from gross mismanagement by state bureaucrats. As this was a newly created agency that reports directly to the executive branch, the blame falls squarely at Kitzhaber's feet. Contrary to the public spin that Oracle screwed up the website, the real problem was in the way Kitzhaber's crew designed the contracts. A friend of mine who works at a large computer corporation and is familiar with IT contracting with public agencies had this to say about how flawed the process was with Cover Oregon:

IT contracting is a discipline. There are standards, procedures and controls to protect investments. These guys used seriously unethical loopholes to circumvent the controls.

Not only was Oracle on a "time and materials" contract (which basically means they are just billing hours and not responsible for anything), but they didn't even contract directly with Oracle. The laundered the money through an existing contract with Dell in order to circumvent the proper contracting controls that would have provided some accountability.

On top of that, they played games with splitting up the POs to avoid controls associated with larger purchases.

If I did something like this, I'd be fired instantly. Probably be facing charges. Seriously.

Oregon has extra layers of security in place to limit the amount of any vendor contract without serious oversight. Cover Oregon circumvented these safeguards by billing the project to existing projects instead of billing it under its mandate from the legislature. On top of that, the CIO inexplicably canceled a plan to hire a separate system integrator to serve as general contractor, allowing Oracle to work with no oversight and no deadlines.

There is even more potential for criminal charges. In February it was reported that Cover Oregon officials may have deceived the federal government by creating dummy websites that falsely represented the amount of progress made in creating the healthcare exchange. The allegation is that in order to maintain federal funding, managers lied to the feds about meeting benchmarks in development. The FBI has become involved in that investigation.

Industry insiders are amazed that nobody has gone to jail for such egregious breaches of public trust.

This announcement that Cover Oregon is being scrapped is a landmark in a sad saga of failure, mismanagement and possible criminal fraud. The one positive that may be seen from all this is that it has necessitated the revival of investigative journalism in Oregon, which has lagged badly in recent years as reporting staffs have been slashed and editorial decisions too often favor the one party that has been mostly in charge for the past few decades. Perhaps this will be the final straw for Oregonians, who may be ready to change who they elect to office.

Dunnwatchin's picture

Abuse of medicare is largely why healthcare costs are so unmanageable. Establishing guidelines to reduce costs is one thing and making the guidelines clear and enforcing them is another. It all costs money. Unfortunately, the leftist response to this kind of mess is more intervention. Many leftists believe obamacare doesn't go far enough and will seek a single payer system when it fails. They will forever be fighting for the "40 million unsure". Well, before we go off becoming the new USSR we should look that problem right in the face in terms of markets. We know that a large percentage of this "40 million" are healthy young people who choose not to purchase. When I was in college I could have paid for a $150/month large deductible insurance plan (covering emergencies only basically) but chose not to. That was a lot of money to me back then and I was healthy as a horse. And you know, I was right, I saved myself $5,400! Poor, young, healthy citizens who don't have jobs that provide health insurance by and large have only emergency situations to worry about. Here's the thing about emergency situations-they should cost the person involved a lot of money. If we free healthcare of government (except it's role of securing rights and freedoms) and let markets reduce costs of care for the traumatized, third party payers maybe unnecessary. Hospitals could set up payment plans for these types of patients and be allowed to collect some interest. And young people will be encouraged to safeguard against this type of debt with health savings accounts. Government will be reduced to it's proper "referee, police, security" role. This won't lead to utopia but our system will make much more sense. One more thing about Republicans who talk through both sides of their mouths about letting markets fix health care AND not socializing because "we have the greatest system in the world". Then they talk about all the wonders of it has created literally bringing people back from the dead. Many of these "wonders" were achieved on the back of the american taxpayer and not from free markets. The truth is our current system is not the greatest because it is largely socialized and costs too much. If we are going to allow free markets control our system we have to be realistic for a change about what a health care system can and can not do. A system that is expected to someday eradicate death, illness, and trauma will enslave it's citizens in the process.