After investigation by a key House committee, the spending of more than $300 million on Cover Oregon might soon be subject to criminal investigation by the Oregon Attorney General as well as the U.S. Justice Department. The House Oversight and Government Reform Committee, chaired by Rep. Jason Chaffetz, after a year-long investigation, released its report today, titled “How Mismanagement and Political Interference Squandered $305 Million Federal Taxpayer Dollars.” The committee also sent letters to U.S. Attorney General Loretta Lynch and Oregon State Attorney General Ellen Rosenblum referring the issue for criminal investigation.
In those letters to Attorneys General Lynch and Rosenblum, Chairman Chaffetz wrote, “The documents and testimony show Oregon State officials misused $305 million of federal funds and improperly coordinated with former Governor John Kitzhaber’s campaign advisers. Official decisions were made primarily for political purposes. Cover Oregon was established as an independent organization by the legislature, and was not intended to be a wholly controlled subsidiary of the Governor’s political apparatus. Evidence obtained by the Committee shows, however, close coordination between Governor Kitzhaber, his official staff, his campaign advisers, and the supposedly independent Cover Oregon. The evidence we have uncovered implicates violations of state laws that restrict political activity by public employees.”
The Committee report names all the appointees and staff involved in the Cover Oregon affair, including those from Gov. Kitzhaber’s office, Cover Oregon itself, the governor’s “Area 51 team” of political advisors and consultants, and staff members from the Centers for Medicare and Medicaid Services (CMS) that were involved. One of those advisors was Cylvia Hayes, who is identified as “Kitzhaber’s fiancée” and “a member of Kitzhaber’s Area 51 team.”
Having involved political advisors in the handling of the Cover Oregon mess, Gov. Kitzhaber and his cronies might well face criminal investigation and possible prosecution, for potential violation of state laws on the political activities of state employees.
The state of Oregon opted to build the Cover Oregon exchange using its own IT platform, and was granted for it $305 million in federal funds from the Department of Health and Human Services (HHS). The Cover Oregon exchange was due to open on October 1, 2013, and the governor’s office promised the deadline would be met. After the late launch of the exchange, it failed to allow citizens to sign up electronically, a “hybrid process” involving manual entering of applications submitted by paper or PDF document had to be employed.
The committee report lists four key findings, including widespread political interference by former Governor John Kitzhaber’s (D-OR) campaign staffers in official business, The former Governor’s official staff and his campaign advisers undermined the work of the Cover Oregon Technology Options Workgroup and manipulated the process toward their preferred outcome of moving to HealthCare.gov, CMS failed to adequately oversee the development and implementation of Cover Oregon, and CMS failed to ensure Cover Oregon and the Oregon Health Authority did not misuse federal funds.
The Cover Oregon Board of Directors voted in April of 2014 to switch to the federal HealthCare.gov, and by then the $305 million in federal funds from HHS had already been spent on the Oregon Obamacare exchange. After reviewing more than 170,000 pages of documents from the State of Oregon, CMS, Oracle, four depositions and a transcribed interview, and other sources, the House Oversight Committee published today’s report on Cover Oregon.
The committee found that the switch to the federal health exchange was driven by political considerations, at the direction of Gov. Kitzhaber and his staff and political advisers. Kitzhaber’s top political adviser, Patricia McCaig, was instrumental in influencing the decision to switch to the federal exchange.
“Documents and testimony show the involvement of Kitzhaber’s staff and campaign advisers was inconsistent with the intent of Oregon law and the Cover Oregon governance model. The Oregon Legislature clearly established Cover Oregon as an independent public corporation governed by a Board of Directors. The Executive Director of Cover Oregon served at the pleasure of the Cover Oregon Board of Directors and was required to have an undivided fiduciary loyalty to Cover Oregon.33 The Executive Director violated this fiduciary duty by relinquishing his decision-making authority to the Governor’s office,” the report found.
The committee found the blurring of lines between the governor’s office during the campaign and the governor’s campaign for reelection, including the possible use of campaign funds for non-campaign purposes to support the governor. McCaig also testified: “What we did was use funds that were available out of the campaign to add capacity, in an appropriate and legal way, to work to support the Governor.” The governor’s staff believed the failure of Cover Oregon was politically beneficial to Kitzhaber’s Republican opponent in the election, and sought to shift the blame to Oracle, the IT firm involved in developing the web site for Cover Oregon.
In the end, $305 million of taxpayer money was spent on a failed state-based exchange that got no one signed up for health insurance via the Affordable Care Act, and the Cover Oregon was shut down by the governor and his staff due to political considerations related to his campaign for reelection as governor. As a result, the political involvement of public officials has been referred for criminal investigation.