The federal government failed to conduct oversight over the $305 million taxpayer funded Cover Oregon Obamacare exchange, according to a report released by House Oversight Committee Chairman Jason Chaffetz (R-Utah). This absence of federal oversight occurred even as the state’s independent quality assurance manager, Maximus, flagged the state exchange as “high risk.”

Nationwide, more than $5.5 billion in taxpayer funds was distributed to states by the Centers for Medicare and Medicaid Services (CMS) for the purpose of planning and constructing state exchanges that would administer Obamacare. In addition to providing funds, CMS was required to oversee the development and implementation of all exchanges to ensure taxpayer funds were responsibly spent.

In the months and years ahead of the October 1, 2013 deadline CMS officials were glowing in their praise of Cover Oregon, even awarding the state additional funds. Concurrently, Maximus was raising red flags about the progress of the project. As the report notes:

“CMS officials applauded the progress at Cover Oregon and awarded the project additional federal dollars when, at the same time, the quality assurance vendor for the project rated the project’s overall health as ‘high risk.’”

As the below table shows, Maximus rated the overall health of the project as “high risk” every month between June 2012 and February 2013. Despite this, the federal government awarded Cover Oregon over $225 million on January 17, 2013. In fact, as the report notes, CMS considered Cover Oregon to be a “model exchange with one federal official even referring to Cover Oregon as their “hail mary.”

In hindsight, Maximus was right — the Cover Oregon exchange was in poor health as was proven when it failed to work by its scheduled launch date – or for months after this deadline.

As the report notes, Oregon officials believed they were close to a working product by April 2014 after months of hard work. However, political advisors for then-Governor John Kitzhaber wanted the problem to go away ahead of his November reelection. As the report found, these advisors quietly manipulated the project so it would fail, and the state would be forced to join the federal Obamacare system:

“The Governor’s campaign advisers staged the decision to create the appearance that it was the Board’s decision to move to HealthCare.gov. In fact, they manipulated the process to make their preferred outcome—moving to HealthCare.gov—the most likely outcome.”

As this was unfolding, Cover Oregon officials remained concerned that the state would be required to repay some or all of the $305 million it has squandered. However, this proved not to be the case. Not only did CMS not require the repayment of any wasted funds, they provided incentives for Oregon to make the switch:

“Rather than recoup lost taxpayer dollars, CMS made it financially attractive for Oregon to abandon its investment and move to the federal exchange.”

As the Oversight Committee report notes, federal grants given to Oregon required the exchange to be independently operated by the Cover Oregon board. The fact that the exchange was controlled by the Governor’s official staff and campaign operatives raises questions over whether grant terms were violated. If so, the state should be required to repay federal taxpayers as the report suggests:

“CMS believed that the ‘Oregon Health Marketplace is independently operated by Cover Oregon (CO).’ The fact that, in practice, decision-making authority vested with Kitzhaber, his staff, and political operatives, raises questions as to whether Cover Oregon violated federal requirements. Cover Oregon had a responsibility to comply with the terms and conditions of its grants…”

Despite this apparent violation of grant requirements and several Congressional investigations into failed state exchanges, taxpayer dollars have yet to be recovered years later. CMS chief Andy Slavitt continues to refuse to conduct oversight over Cover Oregon or any of the state exchanges that have wasted federal funds, a list that includes exchanges in Vermont, Minnesota, Maryland, Hawaii, New Mexico, and Nevada.

Just last month, congressional investigators released a report debunking Slavitt’s claim that his agency had recovered $200 million in wasted Obamacare state exchange funds. In reality, the recovered funds totaled just over $20 million and these funds had been “de-obligated,” meaning the grant had ended without funds being spent. Contrary to Slavitt’s assurances, it appears that federal efforts to recover funds has been non-existent.

This latest report makes it clear that federal funds were wasted at the behest of political operatives while the federal government looked the other way. Given these findings, it is clear that more needs to be done to ensure taxpayer funds are recovered. 


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