Special Report

The Biggest Healthcare Scandal You’ve Never Heard About

An Obamacare state exchange for the ages.

By 3.31.14

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“Bottom Line: We Are On Track To Launch” ranks right up there with “If you like your health care plan, you can keep it,” as one of the biggest falsehoods in the annals of Obamacare.

The latter quote is the one that President Barack Obama used repeatedly as he lobbied for passage of the Patient Protection and Affordable Care Act (Obamacare) and then as he campaigned for a second presidential term. PolitiFact named Obama’s statement the 2013 lie of the year.

Less is known about the first quote, offered by Rocky King in a PowerPoint presentation. King was the then-Executive Director of Cover Oregon. This was the name of the healthcare exchange and related website for the state of Oregon, one of 14 states (and the District of Columbia) that set-up state-run healthcare exchanges as part of Obamacare. The remaining 36 states rely on the federal exchange to enroll citizens in the new healthcare program. King offered his quote in a presentation that was dated two weeks before the Cover Oregon website was to go live on October 1, 2013. 

What King should have known was that the Cover Oregon website wasn’t anywhere close to being ready for launch. In fact, half a year after the official launch date the website is still not functioning properly. As many as 500 people were hired or reassigned by the state after the website failure in order to process healthcare paper applications. King submitted his resignation as executive director in early January.

The Cover Oregon debacle is the biggest healthcare scandal you’ve never heard about. It is also perhaps the biggest government IT failure in U.S. history. The federal healthcare website (www.healthcare.gov) cost at least three times more but at least it’s now operating. No such luck for Cover Oregon.

More than $200 million was spent on building the Cover Oregon website and healthcare exchange. No one appears to confidently know the exact figure since generally accepted business practices were not rigorously followed.

The lead vendor for the project was software giant Oracle, although the process to select a vendor wasn’t very competitive. By the time the entire procurement process was over, Oracle was the only company in consideration. Other potential vendors dropped out of the bidding when the scope of the project became known. 

Relatively little money spent on Cover Oregon actually came from the state. Most of the funds came from federal grants (here, here) totaling $305 million. This is why the Government Accountability Office announced in early March 2014 that it was launching an investigation to determine where and how federal money was spent.

When the website failed to work on October 1, mirroring the epic failure of the federal healthcare website, everyone remotely associated with Cover Oregon publicly expressed shock. They shouldn’t have.

Business process management firm Maximus was hired by Oregon to monitor progress on the website build-out. It began generating warnings immediately after it launched its quality assurance effort in 2011. Beginning with its first report, issued in November 2011, Maximus raised so many red flags that it is conceivable the audit firm could have caused a shortage of red fabric.

The Maximus monthly reports were circulated widely to Cover Oregon officials and to select government offices. Governor John Kitzhaber was on the distribution list.

However, some were not only not included on the distribution but were not even informed that an outside auditor was overseeing the effort. Members of the Oregon legislature, including those serving on the oversight and healthcare committees that had oversight responsibilities, claimed they were not made aware of the Maximus reports. 

Instead, legislators claim they were given periodic presentations by Rocky King who, according to several legislators, painted a rosy picture of a website that was on track for a successful October 1 launch. This was in spite of the fact that Cover Oregon’s own monthly report a year prior to launch reported “high concern” the roll-out deadline would be met.

Leafing through a couple thousand pages of monthly audit reports leaves one with the distinct impression that building a state healthcare exchange website was ambitious enough. However, state officials made a critical decision that exacerbated what was already an overly ambitious plan.

Cover Oregon authorities decided to build a behemoth website that would allow virtually any Oregonian to use it to register for just about any welfare and public assistance benefit including Medicaid eligibility, payments, and enrollment; food stamps; temporary assistance for needy families; and the supplemental nutritional assistance program. The effort, which was nicknamed “No Wrong Door,” elevated a nearly impossible goal to a clearly impossible one in the time allotted.

As detailed in the monthly quality assurance reports, every bit of bad news was compounded by even more bad news. Most, if not all, of it was generated by poor decision-making. For example, Oregon Health Authority chief information officer Carolyn Lawson, the official in charge of the technical aspects of the website build-out, decided to eliminate the position of system integrator before one was even hired. Think of this decision as having several subcontractors erect an office building without using a general contractor armed with blueprints. 

Some observers raised eyebrows over what they considered an unusually cozy relationship between Lawson and vendor Oracle. One legislator warned Kitzhaber in a 2012 email he believed Lawson “presented fraudulent testimony in a legislative hearing to further her self interest… of a consulting job with Oracle.” Lawson resigned for “personal reasons” in mid-December 2013.

Making matters worse was that the entire effort was plagued by political infighting, conflicting priorities, and atrocious business practices. One such example was the “[c]omingling of individual and business [healthcare] accounts.”

March 19, 2014 marked the latest milestone in the failed website. Governor Kitzhaber held a late morning news conference to announce the results of the report he had ordered to be completed. The timing of the press conference was suspect as it coincided with a previously announced public town hall on the topic to be held by Portland’s KATU-TV ABC 2 that same day.

The investigation by First Data was intended to be very narrow in scope. Kitzhaber crafted the questions to be asked and reportedly identified who was to be interviewed. Eight people on that list were never interviewed.

While the report prepared by First Data revealed countless shortcomings, management foul-ups, and suspect business practices, there was virtually nothing in in it that had not already appeared in investigative news reports or in the monthly quality assessment reports prepared by the auditing firm. The First Data report confirmed what was already very apparent: most warnings in the monthly Maximus reports went unheeded. 

The First Data report did clarify what had previously been the subject of speculation. Progress reports for the Cover Oregon website effort were often modified, changed, or altered seemingly to create a misleading impression that a fully functioning website would meet the October 1, 2013 launch date, even though officials were privately worried the site wouldn’t be ready.

At the morning press conference, Kitzhaber announced the resignation of Dr. Bruce Goldberg, a longtime healthcare confidante, and interim executive director of Cover Oregon only since December 2013 (although he was previously the head of the Oregon Health Authority so he had oversight of the project). The rudderless Cover Oregon project was now without any executive leadership.

In a January 2014 interview, the governor told a KATU-TV reporter he first learned of Cover Oregon difficulties after the website failed to launch in October 2013; however, the television station obtained emails (here, here) showing the governor was warned as early as September 2012 that the program was spiraling out of control. Moreover, two years worth of Maximus reports warning of impending failure were sent to Kitzhaber’s office.

Then-Representative Patrick Sheehan warned in his email to Kitzhaber that he believed fraud may have been committed. Sheehan took his concerns to the FBI. At the televised town hall held on the campus of Portland State University,

Sheehan confirmed that an FBI investigation was underway but he wouldn’t elaborate further.

As it has been for President Barack Obama, healthcare has been the signature achievement of Oregon Governor John Kitzhaber, who is running for reelection in November. Perhaps the greatest irony in the entire Cover Oregon debacle was that in late August 2013, Modern Healthcare magazine named Kitzhaber the second-most influential person in American healthcare. No doubt magazine editors thought the accolade would be complimentary.

 

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About the Author
Mark Hyman hosts "Behind the Headlines," a commentary program for Sinclair Broadcast Group. You can follow him on Twitter at @markhyman.