Cover Oregon: We Have No Leverage Over Our Failing IT Contractor

by Jim Geraghty

In Oregon, Governor John Kitzhaber has presided over one of the most expensive and embarrassing failures of any state in U.S. history. The state’s online health-insurance exchange, which was supposed to be ready to go on October 1, has never functioned and is expected to not function until after the March 31 open-enrollment deadline.

Several years of incompetence, perhaps fraud, and unaccountability came to light, only to be followed by . . . several more months of incompetence, perhaps fraud, and unaccountability:

A Feb. 27 review of the project by a federal IT SWAT team found that Oracle Corp., the project’s main information technology vendor, has refused numerous requests from Cover Oregon for basic information about the system it is paying for. The report indicates Oracle may have boosted billings by “throwing bodies rather than skillset” at problems.

Meanwhile, despite months of criticism of poor management, which led to top-level personnel changes, Cover Oregon still hasn’t fixed its oversight and remains largely impotent when it comes to holding Oracle accountable, the report said.

The report is significant in part because of the agency that issued it: the Centers for Medicare and Medicaid Services, which gave Oregon $305 million in grants to build its health exchange.

That is $305 million in federal taxpayer dollars, not state, so all of us paid for this debacle. What’s fascinating is that the governor seemed to recognize early that Oracle was turning in crap work, and tried to play hardball . . . and then blinked:

Feb. 27, a day after a high-level Oracle contingent, led by company President and Chief Financial Officer Safra Catz, met with Gov. John Kitzhaber and his staffers. It wasn’t a goodwill mission. Catz threatened to move the entire Oracle team off the project if the exchange didn’t pay up some of the $69 million the company claimed it was owed for work performed since last fall.

Oregon had stopped paying Oracle in September, blaming the exchange’s problems on the company’s poor work and missed deadlines. Exchange officials said it expected the company to work as long as it took to produce a functional exchange.

Catz informed the Governor the arrangement was no longer acceptable to Oracle.

The company then negotiated for the ensuing two days with lawyers from Markowitz Herbold Glade & Mehlhaf, the Portland law firm representing the state in this dispute. The exchange agreed to pay Oracle $43.5 million. It withheld another $25.5 million and reserved its right to litigate and try to recover any or all of the $160 million Oracle has been paid or claims it is still owed.

A slew of Republicans are running for governor this year: State representative Dennis Richardson appears to be the biggest name. Oregon holds its primary May 20.

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