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FBI Investigating Oregon Obamacare Exchange

1:15 PM, May 5, 2014 • By MICHAEL WARREN
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The Wall Street Journal reports that the feds are investigating the implementation of Cover Oregon, the state of Oregon's now-defunct health insurance exchange as provided under Obamacare. Here's an excerpt:

The Federal Bureau of Investigation is looking into problems that plagued Oregon's implementation of the Affordable Care Act, after the state was forced to scrap its problematic health insurance exchange that was never fully functional, according to people familiar with the investigation.

The FBI has already interviewed some individuals as part of their inquiry, which was first reported by local station KATU and the Portland Oregonian last week.

Cover Oregon, the health exchange created under the Affordable Care Act, has faced major problems for months, and officials last month agreed to scrap their planned state-run exchange that was meant to connect residents with private insurance options. The state will going forward join roughly three dozen other states and use the federal exchange, which itself suffered multiple setbacks in 2013 but has since mostly recovered.

Read the full story here. What investigators are looking for is whether or not officials misled the state about the exchange's problems. "The key challenge facing any prosecutor is proving criminal intent," the Oregonian explains. "Did state officials paint an inaccurately rosy picture of the struggling health exchange? And if so, did they do so with intent to defraud the federal government? Or were they just unduly optimistic or out of touch with reality?"

The total cost of the exchange, over its 8-month existence, is nearly $130 million. And as the Journal notes, Cover Oregon has been a fiscal and organizational mess from the its beginning. The earliest sign was the state's multi-million-dollar ad campaign designed to promote the exchange, before it had even launched. That campaign consisted of costly music videos that seemed to have little to do with health insurance or Cover Oregon.

Then, on Day One of the Obamacare implementation, Cover Oregon was one of several state exchanges that experienced technical problems. By December, it was clear Oregon's exchange was in the worst shape, even more so than the troubled federal exchange, because it wasn't able to enroll anyone in a private health plan (though Medicaid enrollments were up). Cover Oregon began robocalling residents to inform them that if they had not received confirmation of their enrollment through the exchange, then they should probably look for coverage elsewhere.

On January 1, the director of Cover Oregon resigned after having been on "medical leave" since January. Then in March, the interim director resigned. The practice has become a regular occurence for top officials at the exchange, even as the site's initial problems subsided and federal extensions of the enrollment deadline meant Oregonians could start enrolling. Meanwhile, Oregon's Democratic governor, John Kitzhaber, took to avoiding the media as local outlets pressed him on the failures of the exchange.

All this, despite (or perhaps because of) Oregon's perceived advantage on health-insurance reform. As Mark Hemingway wrote in February, Oregon has long been thought of as the progressive laboratory of democracy on health care, though the results of pre-Obamacare have been disastrous. Here's an excerpt:

Cover Oregon had also won a $59 million “early innovator” grant from the federal government to help offset the cost of building its website. In order to keep the federal money flowing, Lawson had to demonstrate that various aspects of the website were working as the Obamacare enrollment deadline approached. Now Lawson stands accused of building a nonfunctioning dummy website to make it appear that website construction was progressing. Sheehan has since asked the FBI to pursue fraud charges against Lawson. 

Despite the fact that Kitzhaber’s legislative director had responded to Sheehan’s email saying, “You have raised some serious allegations, and I will get this into the right hands in addition to the governor,” Kitzhaber, when confronted, denied any knowledge of the allegations against Lawson and stormed out of the interview with KATU. Less than a week later, Cover Oregon’s interim head announced he was considering scrapping Oregon’s exchange altogether and letting state residents try their luck on the federal exchange, which has also been beset with problems. 

That Oregon ended up with the most disastrous of all the Obamacare exchanges—an impressive achievement, considering how bad the law’s rollout has been—has stunned America’s growing herd of health care wonks. Twenty-five years ago—long before Massachusetts created the template for Obamacare—Oregon began trying to implement universal health care coverage. The state should know more about its uninsured population and how to reach them than any other. But no one who’s watched developments over that quarter-century should be surprised that, once again, Oregon’s attempt to provide health care coverage to everyone in the state has culminated in a nationally embarrassing failure. 

The Cover Oregon disaster isn't just bringing on an FBI investigation--it may be hurting Oregon Democrats in the upcoming elections. Kitzhaber was elected to a third (non-consecutive) term in 2010, and the state's Democratic leanings mean he's unlikely to lose his bid for a fourth. But one poll last week showed Kitzhaber tied at 40 percent with a GOP challenger. The same poll found incumbent Democratic senator Jeff Merkley actually trailing Republican Monica Wehby by one point. And a plurality of 46 percent of voters said Cover Oregon and the Obamacare exchange have been failures.

Merkley, who voted for Obamacare in 2010 and promised plenty of benefits to the plan at the time, has been polling weakly for reelection all year. In response to Cover Oregon's problems, Merkley laid the blame at the feet of Oracle, the contractor who built the exchange's website.

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