Committee on Oversight and Government Reform U.S. House of Representatives 114th Congress Cover Oregon: How Mismanagement and Political Interference Squandered $305 Million Federal Taxpayer Dollars Majority Staff Report May 25, 2016 Table of Contents I. Executive Summary .............................................................................................................................................. 6 II. Findings .............................................................................................................................................................. 12 III. Introduction ......................................................................................................................................................... 14 IV. Cover Oregon’s failed launch on October 1, 2013 .............................................................................................. 16 A. Overly ambitious project scope ...................................................................................................................... 20 B. Dysfunctional management and a focus on public perception of the website rather than functionality ......... 26 C. Inadequate oversight of the project ................................................................................................................. 31 D. Bad budgeting ................................................................................................................................................. 37 V. Cover Oregon was supported by a functioning website in April 2014 ............................................................... 42 VI. Financial Sustainability ....................................................................................................................................... 53 VII. Cover Oregon’s switch to HealthCare.gov in April 2014 ................................................................................... 58 A. Kitzhaber’s political operatives become involved in Cover Oregon .............................................................. 60 1. The Governor’s office mixed campaign staff and official staff ................................................................. 60 2. Kitzhaber wanted to have his “ship in order going into battle” .................................................................. 80 3. Unclear reporting structure at Cover Oregon ............................................................................................. 82 4. Technology Options Workgroup’s preliminary recommendation .............................................................. 89 5. Kitzhaber requests more information about the technology options ........................................................ 118 6. April 8, 2014: Kitzhaber’s political operatives receive updates on moving to the federal exchange ....... 125 7. April 9, 2014: McCaig discussed “staging” the decision to move to HealthCare.gov ............................ 134 8. Kitzhaber’s political operatives edited PowerPoint for the Technology Options Workgroup meeting ... 143 9. Kitzhaber’s political operatives edited PowerPoint for the Board of Directors’ meeting ........................ 148 10. May 8, 2014 Cover Oregon Final Report ................................................................................................. 149 B. The aftermath of the decision to switch to HealthCare.gov .......................................................................... 152 VIII. Changing the narrative and “pivoting” the conversation about Cover Oregon ................................................. 160 A. Kitzhaber’s political operatives polled public opinion about how to respond to Cover Oregon ................. 160 B. Kitzhaber’s political operatives wanted to “pivot” the conversation about Cover Oregon .......................... 164 1. Kitzhaber’s political operatives wanted the Governor to attack Oracle in February 2014 ....................... 165 2. Kitzhaber’s political operatives discussed how to “pivot” the conversation when the First Data Report was released in March 2014 .............................................................................................................................. 167 3. Kitzhaber’s political operatives discussed how to pivot the conversation to Oracle ................................ 171 4. Kitzhaber’s political operatives wanted Oregon to initiate legal action against Oracle ........................... 172 C. Kitzhaber’s political operatives influenced messaging for Cover Oregon ................................................... 181 1 1. Kitzhaber’s political operatives influenced Cover Oregon’s communication with third parties .............. 181 IX. CMS failed to properly oversee the Cover Oregon project ............................................................................... 188 A. CMS considered Cover Oregon to be a model exchange ............................................................................. 188 B. The Obama Administration wondered what was going on at Cover Oregon ............................................... 195 C. CMS failed to enforce the terms and conditions of the grants to Cover Oregon .......................................... 197 D. CMS failed to adequately respond to Cover Oregon’s decision to switch to HealthCare.gov ..................... 200 X. Non-government Email Accounts Were Used to Conduct Official Business ................................................... 202 XI. Conclusion ........................................................................................................................................................ 202 2 Table of Names Office of the Governor John A. Kitzhaber John Kitzhaber served as the Governor of the State of Oregon from 1995 to 2003 and from 2011 to 2015. He resigned on February 18, 2015. Michael Bonetto Michael Bonetto served as Kitzhaber’s Health Policy Adviser from 2011 to January 2014. He served as Kitzhaber’s Chief of Staff from January 2014 to February 2015. He also was a member of a team of campaign advisers for Kitzhaber, titled Area 51. The Area 51 team was designed to provide oversight to the campaign staff and consultants and was described as a group of supporters that were personal friends of the Governor and the First Lady. Dmitri Palmateer Dmitri Palmateer served as Kitzhaber’s Legislative Director and Deputy Chief of Staff. Sean Kolmer Sean Kolmer served as Kitzhaber’s Health Policy Adviser from March 2011 to October 2013 and January 2014 to February 2015. He served at the Oregon Health Authority temporarily when he left the Office of the Governor in October 2013. Duke Shepard Duke Shephard served as a Policy Adviser within the Office of the Governor under Kitzhaber. Nkenge Harmon Johnson Nkenge Harmon Johnson served as Kitzhaber’s Communications Director from January 2014 to July 2014. Cover Oregon Elizabeth (Liz) Baxter Liz Baxter served as the Chair of the Cover Oregon Board of Directors. George Brown George Brown served as a Member of the Cover Oregon Board of Directors. Rocky King Rocky King served as the Executive Director of Cover Oregon from 2010 to December 2013. Bruce Goldberg Bruce Goldberg served as the Director of the Oregon Department of Human Services from November 2005 to February 2011 and led the formation of the Oregon Health Authority as the 3 Director from February 2011 to 2013. He served as the interim Executive Director of Cover Oregon from December 2013 to April 2014. Clyde Hamstreet Clyde Hamstreet is a Turnaround Professional and founded Hamstreet & Associates. He served as the acting Executive Director of Cover Oregon from April 2014 to June 2014. Aaron Patnode Aaron Patnode was a member of the Technology Options Workgroup (TOW) convened to explore the technology options for Cover Oregon in March 2014. He served as the Executive Director of Cover Oregon from June 2014 to March 2015. Alex Pettit Alex Pettit is the Chief Information Officer for the State of Oregon. He began in that role in January 2014. He served as the interim Chief Information Officer of Cover Oregon beginning in April 2014 and started to shift away from that role in June 2014. Aaron Karjala Aaron Karjala served as the Chief Information Officer of Cover Oregon from 2011 to 2014. Triz delaRosa Triz delaRosa served as the Chief Operating Officer of Cover Oregon from 2011 to 2014. Carolyn Lawson Carolyn Lawson served as the Chief Information Officer of the Oregon Health Authority from 2011 to December 2013. Tina Edlund Tina Edlund served as the Acting Director of the Oregon Health Authority from December 2013 to May 2014. She served as the Transition Project Director for the project to move health plan eligibility and enrollment functions from Cover Oregon to the federal exchange and the Oregon Health Authority. She served in that role from May 2014 to December 2014. Patty Wentz Patty Wentz served as the Communications Director at the Oregon Health Authority. Campaign Advisers & “Unpaid Advisers” to former Governor Kitzhaber Patricia McCaig Patricia McCaig was a member of Kitzhaber’s Area 51 team. She also served as an “unpaid adviser” on a team for Kitzhaber that focused on addressing Cover Oregon issues. Tim Raphael Tim Raphael served as a Communications Director within the Office of the Governor from January 2011 to December 2013. He worked as a consultant to the Office of the Governor from 4 January 1, 2014 to January 31, 2014. Then, from February 1, 2014 to November 4, 2014, a public affairs firm that employed Raphael