The costly legacy of Cover Oregon

Cover Oregon spent $300 million in federal funds

Cover Oregon is a federally funded online health insurance marketplace, Sept. 20, 2013. (Cover Oregon photo)
Cover Oregon is a federally funded online health insurance marketplace, Sept. 20, 2013. (Cover Oregon photo)

PORTLAND, Ore. (AP) — A bill dissolving the independent corporation that runs Cover Oregon is on its way to the Gov. Kate Brown. But even when it is gone, Cover Oregon will leave a legacy of hundreds of millions of dollars spent on a health exchange that failed — with even more millions in legal fees and other expenses still to come.

Cover Oregon spent $300 million in federal funds, much of it to have Oracle America Inc. build an exchange for Oregonians to buy health insurance. The health exchange web portal failed to launch in October 2013.

The state spent at least $26 million of its own money on Cover Oregon-related projects.

Last spring, Oregon scrapped the web portal and switched to HealthCare.Gov, a federally run website. Cover Oregon continued to perform functions such as interacting between insurance companies and insurance buyers. Now those tasks will be folded into other agencies.

Here is a breakdown of how much money has been spent as a result of the Cover Oregon fiasco, by whom, and expenses still to come.

MONEY SPENT

— $240 million – amount Oregon paid to Oracle for developing both the exchange for individuals and small businesses and for public assistance modernization projects. This was funded in part by a $300 million federal grant. The remainder of the federal grant went for salaries, marketing, communications, community grants and other administrative costs.

—$23 million – additional state money spent on the failed modernization technology project.

—$9.1 million – spent through the end of 2014 to hire hundreds of temporary workers to manually process paper applications.

—$6.6 million – amount Cover Oregon paid Deloitte to assess glitch-filled exchange and provide future options for the state, as well as to transition the state to HealthCare.gov.

—$1 million – amount paid for independent assessment of Cover Oregon project by First Data, and for services of turnaround expert Clyde Hamstreet and his team who took over Cover Oregon’s reigns at the height of its failure last spring.

—$1.9 million – attorney’s fees for legal fight against Oracle and federal criminal investigation into exchange failure.

MONEY STILL TO BE SPENT:

—$30 million – estimated amount Oregon will pay for adapting Kentucky’s Medicaid system. The federal government has promised to pay 90 percent of it.

—Unknown – amount Oregon will pay Oracle to host the Medicaid system until December 2015.

—Unknown – amount it will cost Oregon to build a website for small businesses to obtain health coverage for employees.

—Unknown – amount it will cost Oregon to modernize the state’s legacy social services computer systems.

—Unknown – additional legal fees for Oregon-Oracle lawsuits and criminal investigation.

CONTESTED MONEY:

—$23 million – Oracle says Oregon still owes it this amount for building the exchange; the company is seeking the money as part of a breach of contract lawsuit it filed last August against the state.

—$5.5 billion – In its own lawsuit, also filed last August, Oregon accuses Oracle of fraud, false claims, breach of contract and civil racketeering. The state is seeking multiple claims for damages, penalties, and attorney’s fees that total this amount.

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