Gingrich says IBM made Obama an offer to save billions on health care

During a discussion of health care costs at a Nov. 5, 2011, two-person GOP presidential debate outside Houston, Republican presidential candidate Newt Gingrich made a dramatic claim about a White House visit.

Gingrich, who was debating then-candidate Herman Cain, said: "The CEO of IBM went to the White House and said to (President) Barack Obama, you can pay for virtually all of Obamacare by simply taking existing IBM technology and applying it to stop paying crooks."

By "Obamacare," a term that some view as polarizing shorthand, Gingrich meant the Patient Protection and Affordable Care Act, the Democrat-led 2010 overhaul of health care laws. Obama affixed a price tag of $900 billion to the plan when he rolled out his version in September 2009. Subsequent cost estimates varied.   

So, Gingrich is suggesting a lot of fraud. But was he right that IBM presented the president with such a scheme?

By way of background, we note that Gingrich has long advocated using technology to help cut health-care costs. Until recently he led a for-profit consultancy called the Center for Health Transformations, which counted IBM among its clients.

We asked Gingrich’s campaign for the former House speaker’s basis in making the statement. Spokesman Joe DeSantis told us: "All I can say is that he heard it from someone he trusts.  Sorry."

But DeSantis directed us to video of a Sept. 14, 2010, Wall Street Journal interview of Sam Palmisano, IBM’s then-CEO and chairman.

Separately, IBM spokesman Ed Barbini also referred us to the Journal interview. He declined further comment.

The video opens with the Journal’s Alan Murray saying: "When President Obama was elected, you started spending a fair amount of time at the White House."

Palmisano: "Yes, I did."

Murray: "What was that all about?"

"Well," Palmisano replied, "part of it was the administration was reaching out to the business community. I mean, I was one of many, obviously ... around economic (issues)... So we were having lots of input, lots of exchange. That’s what we all were working on at the time."

Asked how he thought the White House visits had turned out, Palmisano replied: "We haven’t made any progress. It doesn’t mean there hasn’t been a lot of interaction."

Murray: "Well, what’s the point of interaction if it doesn’t lead to progress?"

Palmisano: "You’d have to ask the people who aren’t progressing."

He added, "We’ve done tons of work, and for whatever sets of reasons, we haven’t been able to establish, be in sync with, the priorities."

Palmisano offered an example: "We -- and I’m fairly confident about this one because it required no legislative change -- we could have improved quality and reduced the costs of the health-care system by $900 billion... It was self-funding. You could have insured anybody you wanted to, illegal aliens, dogs, cats, ponies, whatever, right? And the stuff was simple. Did not require any big legislative change."

About $400 billion of the reduced costs could be realized through negotiating discounts with drug companies, just as IBM negotiates its own discounts, he said. "Buy a nationwide discount," he said. "Just like pharmaceutical companies sell to us on a nationwide discount. It’s no different. I said, ‘Take the IBM discount! Take the IBM discount.’ "

Another example of savings: "Two hundred billion in fraud. That was a 3 percent improvement, by the way. This wasn’t transformational. ... There’s so much fraud in the system -- 3 percent and then Year 7 was 8 percent, Year 5 was 5 percent. It’s 200 billion."

Murray: "And why didn’t they do that? Is there a fraud --"

Palmisano: "I said we would do it for free to prove that it works. They turned us down. You’ll have to ask them… Free. Free wasn’t good enough."

Murray asks again: Why?

Palmisano replies, "I think what it is, not to be judgmental about these things, I really do think what it is is that we weren't aligning with the priorities. ... the priority at the time, if I stay on my example of health care, was not to reduce costs and improve quality.  It was to provide insurance and coverage for more people.  That was our priority in the line.  All we said, if you did this you could fund the priority without increasing the deficit, taking taxes up.  And we couldn't sell the case."

Let’s take a breath here. In the Journal interview, Palmisano insisted he gave the White House an offer to cover the $900 billion estimated cost of the health care plan -- with $200 billion coming from reduced fraud.

We were unable to find independent confirmation of such an offer -- and our search of news archives indicates the CEO’s comments to the Journal touched off only one follow-up news account. Nearly a month after the interview, on the Oct. 8, 2010, episode of a Fox News program, guest host Stuart Varney said that an IBM spokesman stood by Palmisano’s claims.

That program aired shortly after a more widely publicized event: On Oct. 6, 2010, Palmisano led a group of high-tech CEOs to the White House to present Obama with a proposal they said could save the government $1 trillion by 2020.

Among the plan’s seven initiatives: saving $500 billion by streamlining supply chains and pushing suppliers to reduce costs; and saving $200 billion by using technology to better detect "improper payments" -- payments that prove to be unnecessary or fraudulent. The proposal cites an Office of Management and Budget estimate that Medicare accounted for $54 billion of the government’s $98 billion in improper payments in 2009.

By email, White House spokesman Brandon Lepow did not provide information confirming or denying Palmisano’s claims to the Journal about presenting savings ideas. Lepow initially said companies including IBM had offered the administration help fighting fraud. He later told us he had learned his first statement was inaccurate. His follow-up statement said the administration and IBM had worked on "possible projects" but agreed not to "move forward," although IBM is a partner in "our work to fight fraud."

Our ruling

Gingrich did not reveal the source of his claim or provide backup beyond the Journal interview. Meantime, the White House did not confirm or deny Palmisano’s claims. Contrary to Gingrich’s debate claim, though, the then-CEO said $200 billion in funding would come from cutting fraud -- not nearly enough to pay for the health-care overhaul. We rate Gingrich’s statement Half True.

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