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The Oracle Oregon fiasco, crying wolf on an Obamacare tax, and anointing the ‘Politico 50′

By Steven Brill
December 31, 2013

1. The Oracle Oregon fiasco:

We all know by now that the dominant story line of the Obamacare website’s failed launch is that the federal government is terrible at doing high-tech projects — let alone one that involves the e-commerce wizardry that has made Silicon Valley the envy of the world.

But it turns out that one state exchange to sell Obamacare insurance plans has had an even more disastrous launch than the 36-state HealthCare.gov. It’s CoverOregon.com — the website for the Oregon exchange.

In fact, as this Associated Press story notes, last week state officials cancelled an advertising campaign to get people to sign up at CoverOregon.com because the website still isn’t up and running.

But Oregon didn’t rely on a bunch of bureaucrats to supervise its launch. Far from it. The state farmed the entire project out to … drumroll … Oracle, one of the crown jewels of hi-tech America. The company’s chief executive officer, Larry Ellison, perpetually appears near the top of the Forbes 400 list (he’s number three this year) and was eagerly available to the press when he financed his successful America’s Cup entry last fall, at the same time that the website was supposedly being finished.

Nick Budnick of the Oregonian has been all over this story, but the Oregon/Oracle fiasco has escaped the national attention it deserves. And Budnick has been unable to get Oracle to provide any comment.

It’s time for the national press to trail Ellison and ask him what happened and what he’s going to do about it.

2. Crying wolf on an Obamacare tax:

One mechanism that Congress deployed to pay for the subsidies given the poor and middle class to help them buy health insurance under Obamacare is an excise tax of 2.3 percent on all medical devices, such as artificial hips or pacemakers.

The rationale was that with its humongous profit margins, the $136 billion industry (we spend more every year in the United States just on artificial hips and knees than Hollywood takes in at the box office) could easily afford the tax. Moreover, the industry would simply be paying back a portion of the extra profits it would enjoy from all the new customers who received health insurance coverage under Obamacare.

Nonetheless, from the moment the tax was considered by Congress in 2009, the device makers and their army of lobbyists howled that it would stifle innovation, increase costs and otherwise ruin an industry that claimed responsibility for 422,000 jobs. The tax survived the lobbying onslaught, primarily because Senate Finance Committee Chairman Max Baucus (D-Mont.) insisted on keeping it.

But the lobbying has continued, and the odds are now good that the lobbyists will finally prevail. Among the measures now being discussed on Capitol Hill to repeal, curtail or amend Obamacare, getting rid of the device tax seems to be gathering the most bipartisan support.

The device tax took effect last January. So, it’s time for someone to cut through the rhetoric that repeal is needed to save the industry and look into just how much damage, if any, the tax has done.

The hardship pleas are coming not just from usual-suspect Republicans but also from Democratic members of Congress who represent states where the industry is headquartered, such as Senator Al Franken of Minnesota. Yet a quick look at the results reported recently for the industry’s leading company — Medtronic, Inc., based in Franken’s home state — shows no sign of the carnage predicted by the lobbyists and their congressional sympathizers. Net earnings for Medtronic’s fiscal quarter ending on October 25, 2013 were up 40 percent over the prior year, to $902 million on revenue of $4.2 billion (producing a net profit margin of 21 percent, astounding for a manufacturing company).

With repeal of the device tax likely to be a hot topic this winter, it’s time for the financial and political press to dig deeper to see where the beef is behind the industry’s beef.

3. Anointing the “Politico 50” PAC moguls:

As the 2014 election season approaches, we keep reading articles like this one in the New York Times last week, “Upstart Groups Challenge Rove for GOP Cash,” which speculate on the fight among professional political strategists and media buyers to raise funds. Even House Speaker John Boehner (R-Ohio) and others have charged that some of the groups fomenting conservative attacks on the more moderate Republicans are doing it because it helps them raise money for PACs and SuperPACs that they can then control and draw fees from.

With all of that in mind, I wish Fortune, Bloomberg Businessweek or maybe Politico would assign a team to produce something like the Fortune 500 for the highest-earning political consultants. Maybe it could be called the Politico 50.

Who are the consultants, fund-raisers or media buyers — on both sides of the aisle, and among conservatives as well as unions and other liberal groups — who have built up the biggest money machines? In the age of PACs and SuperPACs and their “non-profit” sister spinoffs, who are the biggest individual earners? Who has turned the sweepstakes into the most lucrative family business, with spouses, relatives and other offspring on the payroll?

 

PHOTO (TOP): Larry Ellison, co-founder and chief executive of Oracle Corporation, introduces the company’s latest SPARC servers at Oracle Conference Center in Redwood Shores, California, March 26, 2013. REUTERS/Stephen Lam

PHOTO (INSERT): GOP political strategist Karl Rove (L) jokes around with Ed Gillespie as they walk to a farewell party for former director of the Office of Management and Budget, Rob Portman, across from the White House on Pennsylvania Avenue in Washington, August 1, 2007. REUTERS/Jason Reed

 

Comments
3 comments so far | RSS Comments RSS

Mr.Brill continues to spread misconceptions about this tax, which four of five Senators (three of five Democrat Senators) want repealed. First off, newly insured Americans will not translate into a wave of new devices sold. Those patients are already getting medical devices as needed and when they are needed. No EMT fishes for an insurance card in the pocket of a passenger involved in a car wreck before a drainage catheter is placed or defibrillator paddles are applied.

While Mr. Brill continues to focus on the profits of one giant company, Medtronic, and the orthopedic sector of medicine he fails to understand the damage that this tax on gross sales has had on innovation, jobs and patients. Estimates range from 7,000 companies in this space to more than 15,000 and with profit margins averaging less than 4 percent, Medtronic is clearly an outlier.

Why does that overwhelming and bi-partisan majority of lawmakers want this tax repealed? Not because of lobbyists. They want it repealed because they now understand, thanks to a grassroots groundswell from the industry, that this tax burdens the balance sheet of a company in this sector by claiming the equivalent of an $85,000 a year job each and every 20 minute since January 2013.

For a firm with U.S. sales of $1 billion annually, the tax bleeds from their balance sheet the equivalent of a $65,000 a year job every other day. Maybe Mr. Brill should stand at the padlocked gates of any number of factories that have left the U.S. for Costa Rica, Singapore and Ireland and see firsthand the trauma caused by this tax in 2013. He should sit down at the kitchen tables of thousands of workers who have lost their jobs and explain to them that this tax, which is a 30 percent increase for the average firm, was no big deal.

For some unfortunate companies, it claimed ALL the profits from 2012 and some, like Alex Gomez of New Wave Surgical of Florida, have had to take out loans to pay their new tax bill. It’s no surprise that more than 11,000 employees from about 3,000 companies in the U.S. signed a petition at http://www.no2point3.com to urge representatives to repeal this tax. In the interest of full disclosure, I am the media relations director at Cook Medical.

Posted by JohnEckberg | Report as abusive
 

Bah. Larry is probably on his yacht cracking jokes about the 99.9% while taking in bath in a tub filled with Moet.

Posted by BidnisMan | Report as abusive
 

As an owner of a small medical device manufacturer in Ohio, I applaud the efforts of companies like Cook Medical that have worked very hard to get the word out about the Medical Device Tax and its impact. My company manufactures equipment primarily utilized by Medicare patients so the sales job on ‘more patients being covered equals more business’ is a joke. Ironically, our type of product was invented as the solution to a better, lower cost rehab for the patient 25 years ago. Yet as a device manufacturer we’re supposedly responsible for rising healthcare costs. Our industry has had a price war for the last 10 years….not going up, but going down. To compete in today’s market we have to find ways to sell for less and last longer. A little more difficult when we have to hand over 2.3% off the top to Uncle Sam every 15 days, 12 months a year. Votes in November seem to be our only hope at this point.

Posted by AndyFurniss | Report as abusive
 

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