- The Washington Times - Monday, May 18, 2015

Former Oregon Gov. John Kitzhaber was told in early 2014 that the Obamacare state health care exchange his administration spent $305 million building could be made operational. But his administration chose instead to scrap the project and seek a scapegoat to keep the fiasco from harming his re-election, according to evidence turned over to congressional investigators.

The materials, reviewed by The Washington Times, include emails and memos between state officials and campaign aides as well as a transcript of a conversation from a state official turned whistleblower that suggests federal tax dollars were sacrificed for political convenience.

The memos show Mr. Kitzhaber’s election campaign aides took the unusual step of instructing state officials on how to handle the Cover Oregon exchange project, especially when the project was abandoned just before its launch. The campaign aides even sought to supervise the testimony of a state official appearing before the U.S. Congress.

The memos suggest that the decision to scrap the project before it launched — creating a massive loss for federal taxpayers and inconvenience to thousands of customers — was driven more by politics than merit, according to the chairman of a House committee investigating the matter.

“There is a curious crossover between the political and the executive branch in Oregon, and it doesn’t smell right, and it doesn’t look right and there’s a lot of smoke,” said Rep. Jason Chaffetz, Utah Republican and chairman of the House Oversight and Government Reform Committee. “There are hundreds of millions of dollars that need to be accounted for. It’s highly suspicious, and we intend to get to the bottom of it.”

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Mr. Kitzhaber resigned this year amid an ethics scandal that remains under federal criminal investigation. He raised suspicion in April 2014, during his re-election campaign, when he shut down the oft-delayed Cover Oregon health care exchange just weeks before its scheduled launch.

Janet Hoffman, criminal defense attorney for the former Oregon governor, declined to comment Monday evening.

The state had accepted $305 million in federal aid to build the exchange, and its shutdown required Oregon to spend another $41 million to join the federal Obamacare exchange as an alternative. It is one of several state health care exchanges that have struggled under Obamacare.

About half of the 17 health insurance marketplace exchanges set up by states have had financial trouble, and three of them — in Nevada, New Mexico and Oregon, which collectively received $517 million in federal funding — are now using the federally facilitated marketplace instead.

Hawaii announced last week that it may be forced to ditch its exchange this year because of financial problems, and technical problems are prompting Minnesota and Vermont to consider using the HealthCare.gov exchange as well.

The Oregon episode has spurred a significant legal battle, as the main contractor for the project, Oracle Corp., has accused state officials of engaging in conflicts of interest and exercising such poor oversight that it jeopardized a project that otherwise would have succeeded.

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The state has countered by suing Oracle, accusing it of shoddy work.

Evidence from official documents gathered by congressional investigators or obtained under open records laws suggests Mr. Kitzhaber’s aides applied pressure to kill the project even though the governor had been told the exchange could be fixed and made operational.

Emails recovered from computer servers show Mr. Kitzhaber was directly told in February 2014 by Cover Oregon’s director that the state exchange’s problems could be fixed with additional testing and training.

“Cover Oregon’s perspective of system readiness is that the system can function with a 90+ percent of accuracy for 90-95 percent of the population,” Cover Oregon’s director at the time, Bruce Goldberg, wrote the governor. “[Oracle] emphasized that best practice would be to release the ‘final’ system and test for 5 or 6 months.”

In another email to the governor in February, Mr. Goldberg wrote: “Right now reviews seem mixed but more positive than negative,” and despite problems with logins, “It appears some of the problems can be overcome with training.”

Another key figure to emerge as a whistleblower is Carolyn Lawson, the Oregon Health Authority’s former chief information officer. She is suing the state, claiming she was wrongfully terminated for refusing to go along with the administration’s narrative that the exchange was so flawed that it needed to be shut down.

The exchange was supposed to open in October 2013 but was delayed because of technical glitches. Oracle said it could have had the entire system operational by February 2014, but state officials and Kitzhaber campaign aides plotted to shut it down, the memos show.

Ms. Lawson has produced a transcript of a conversation she had shortly before she was terminated suggesting that the Kitzhaber administration was seeking a scapegoat for the shutdown.

“Somebody has to be held to blame for this — it’s going to be [Cover Oregon’s former Executive Director] Rocky [King] or it’s going to be Oracle or it’s going to be you. We want it to be Oracle, but it can be you if you want,” an Oregon Health Authority official was quoted as telling Ms. Lawson, who recorded the conversation in a letter her attorney sent to the state.

When Ms. Lawson refused to follow the Oregon Health Authority script, she was immediately terminated, according to information her attorney filed with the state.

“You will be resigning today. It’s going to be for personal reasons. You can write the resignation letter or we can write it for you,” another health authority official was quoted as telling Ms. Lawson in the information her attorney made public.

Ms. Lawson’s attorney, David Angeli, said his client was not available for interviews.

An Oregon Health Authority spokeswoman declined to comment.

The state exchange program struggled under Mr. Kitzhaber, a Democrat who supported Obamacare.

From the initiation of the project in 2011 to the point in April 2014 when state officials ultimately decided to abandon the state portal, Cover Oregon had four executive directors, each with no formal or practical information technology training or experience, Oracle told The Times.

“We were hired to assist Oregon develop technical solutions as we have done in countless other states and for the federal government. The system registered hundreds of thousands of Oregonians and was fully functional by February 2014,” Deborah Hellinger, an Oracle spokeswoman, said in an email. “Unfortunately, along the way it became clear that the process in Oregon was being managed by unaccountable campaign consultants whose primary concern was the political implications for the former-Governor and in shifting blame away from state mismanagement.”

Clyde Hamstreet, who briefly served as interim executive director for Cover Oregon in 2014, acknowledged political pressure from the Kitzhaber administration to abandon the exchange. He also concluded that gross mismanagement at Cover Oregon, not technical neglect by Oracle, led to the exchange’s repeated delays.

In a report he delivered to state officials in August, Mr. Hamstreet wrote that there was “little accountability among management” working on the exchange and “high level objectives were not aligned and executives were frequently at odds with one another, at times displaying unprofessional conduct such as territorial behavior, open hostilities, and use of strong profanities in verbal communications.”

Two other companies retained as outside consultants by the state to examine the exchange’s difficulties — First Data and Maximus — corroborated Mr. Hamstreet’s concerns in their own reports, saying the state’s poor oversight was responsible.

“The decision to not use an overall system integrator for the project departs from best practices. This decision created a lack of accountability on the project. It contributed to a lack of scope control, a delay in requirements definition, and unrealistic delivery expectations,” First Data concluded in an April 23, 2014, report.

Maximus, the state’s quality assurance vendor for the project, raised concerns about the decision not to use a system integrator in an initial risk assessment report as early as Nov. 3, 2011, and reported as late as October 2013 — when the website was scheduled to launch — that efforts were continuing to “lock down” the scope of the project.

Mr. Hamstreet told The Times that he endured political pressure in trying to get the exchange launched.

“I was sensitive, given media coverage that the polling on the Cover Oregon brand name could become fodder for political purposes unless it was done carefully and was focused directly on operational questions,” Mr. Hamstreet said in an interview. “I did not know what the campaign committee was thinking.”

Just weeks before the governor announced that Oregon’s federally funded health care marketplace would be abandoned, he gave a green light to a top campaign operative to effectively commandeer the fate of Cover Oregon.

On Feb. 8, 2014, political operative Patti McCaig — who was not a state employee — wrote an email to Mr. Kitzhaber and his fiancee, Cylvia Hayes, that assigned roles to other campaign operatives to manage Cover Oregon.

“It’s clear we need more accountability and follow thru from the campaign and some specific, intensive management of the Cover Oregon issues. I do not think the governor’s office has the staff capacity on the Cover Oregon piece,” she wrote, adding that state officials “need to be managing from the gov[ernor’s] office, bridging the information gap with the campaign, and most importantly identifying and teeing up the critical and emerging Cover Oregon issues for the combined team so we can develop a plan and be more prepared both at the state level and the campaign.

“We need one person who’s entire purpose is getting their head around this from a communication/planning perspective and providing the rest of us with the right level of information to make informed decisions.”

Mr. Kitzhaber responded in all capital letters: “this sounds very good to me!!!”

Oregon law prohibits campaign officials from specifically directing state government activities, and the federal Hatch Act prohibits the use of taxpayer resources for political activities. The act applies to executive branch federal employees and to state and local employees who are principally employed in connection with programs financed in whole or in part by federal loans or grants.

One week later, on Feb. 16, 2014, Ms. McCaig wrote to Mr. Kitzhaber and his chief of staff, Mike Bonetto, that “being mindful of not putting too much on paper, I did want to put together an org chart, goals, and overview together for the Cover Oregon team a SWAT Team [that] is a combined team of both public and private resources.”

On April 2, Ms. McCaig announced that she would take control of a critical conference call.

“I’d like to run tonight’s meeting and I think it should be limited to Cover Oregon issues — specifically: 1) IT recommendation: content, process, and timing 2) Greg Van Pelt’s appearance tomorrow: goal for committee/Oregon, detailed schedule, response, spokespeople 3) Hamstreet: Contract, reporting authority, messaging, spokespeople.”

Mr. Van Pelt, a key adviser to Mr. Kitzhaber, was scheduled to testify about the exchange debacle before the U.S. House Oversight and Government Reform Committee in Washington in the subsequent days.

The beginning of the end came on April 9 when Ms. McCaig set forth an eight-step plan to phase out Cover Oregon.

On the possibility of “investing further in the Oregon option the consensus is to let it go. We don’t see a path to save it. Regardless, the Cover Oregon Board would hear and accept the federal exchange recommendation April 22, 23, or 24.”

On April 25, 2014, Cover Oregon’s board voted to switch to the federal exchange.

The Washington Times made several attempts to contact Ms. McCaig and other Kitzhaber political operatives copied on the email chains by phone and email, but none responded.

On Feb. 13, the same day Mr. Kitzhaber resigned the governorship, the House oversight committee sent him written notice that the misspent federal funds related to the Oregon health care exchange was under investigation by Congress, and the letter highlighted the campaign’s coaching of Mr. Van Pelt.

“Media reports indicated campaign staff even edited the testimony of a witness who testified before the Committee on April 3, 2014. It has also come to our attention that an employee in the Governor’s office instructed state officials to remove emails from your personal account from State servers,” the letter says.

Mr. Chaffetz said he does not believe Oregon’s failures mean all other state exchanges will necessarily fail.

“The abysmal failure of Oregon shouldn’t lead the rest of the country to go to a single-payer system. Utah has done quite well and would do better. We shouldn’t gravitate to the lowest common denominator,” he said. “Health and Human Services gave hundreds of millions of dollars to Oregon. We need to figure out why that took place and how that one essentially got flushed down the toilet.”

• Jeffrey Scott Shapiro can be reached at jshapiro@washingtontimes.com.

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