Health Inspection

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JUNE 20, 2005

Health Inspection

Poor Wal-Mart is feeling a little bit, well, picked upon. Sure, the
company just generated $285 billion in sales and $10 billion in
profits. And, yes, it is rapidly expanding into such far-flung
places as China. But, here in the United States, Wal-Mart's growth
plans have suddenly run into political opposition from labor unions
and liberal politicians--who, according to the company, aren't
being fair.While critics have long attacked Wal-Mart for everything from
destroying mom- and-pop stores to exploiting cheap foreign labor,
the focus of the present controversy is health insurance. According
to published figures, Wal-Mart insures less than half of its U.S.
workforce. (Costco, considered by many to be Wal-Mart's nearest
competitor, insures 96 percent.) What's more, the coverage that
Wal-Mart does offer frequently includes large deductibles that
leave employees exposed to heavy out-of-pocket costs. Labor
activists and their allies say that such a profitable company owes
its workers more than that. Last month, the Maryland state assembly
signaled its agreement by passing a bill that would have required
Wal-Mart either to spend more on employee health benefits or pay an
equivalent amount in taxes to help underwrite the state Medicaid
program, on which many Wal-Mart employees rely.

Governor Robert Ehrlich ultimately vetoed that bill. But the state
assembly may yet override the veto, and at least ten states have
considered similar bills, according to The New York Times. So, this
week, while shareholders at Wal-Mart's annual meeting in Arkansas
were feted by the likes of Will Smith, Jon Bon Jovi, and Garth
Brooks, company officials started complaining that they had become
scapegoats for the nation's failing health insurance system. "The
health care issue is much broader than Wal-Mart," said Susan
Chambers, a company vice president. "Maliciously targeting one
company doesn't address this issue. It doesn't provide one person
with insurance or take one person off the list of America's
uninsured. It doesn't offer solutions."

In one sense, that statement is correct: The problems of the U.S.
health care system really are a lot bigger than one company and
require much broader solutions. Unfortunately, companies like
Wal-Mart have historically obstructed those solutions. And they're
still doing so today.

To understand why, you need to understand how American workers came
to depend on companies like Wal-Mart for health benefits in the
first place. In most of the Western, developed world, governments
organize health insurance-- guaranteeing coverage as a right of
citizenship, mandating minimum benefits, and financing care,
primarily through taxes. But efforts to bring universal health care
to this country have always run up against opposition from the
business community, which opposed government interference in the
private sector. To corporate America, the only acceptable way to
ease public access to health care was private health insurance,
which it embraced starting in the 1930s. Afterward, as scholars
like Jacob S. Hacker have noted, business sought to cement the link
between insurance and employment--partly to evade the wage controls
of World War II and partly to undercut union organizing efforts.

But, in the last two decades or so, as medical costs have
skyrocketed, unions have atrophied, and the pressure to squeeze
labor costs has intensified, employers have been rethinking the
commitment to employee benefits. Many companies engineered (or
reengineered) their workforces so that fewer employees were
eligible for coverage; others ratcheted back coverage, transferring
more costs to employees. All of this has made Wal-Mart a model
other companies emulate--if not out of admiration, then out of
perceived necessity. The impetus for the 2003 strike by California
grocery workers, for example, was employer pressure to cut health
benefits in order to lower prices because Wal-Mart was coming to
town.

The campaign to mandate that Wal-Mart spend more money on health
insurance represents an effort to turn back the clock, so that
workers can once again depend on employers for more affordable and
comprehensive coverage. It's not an outlandish idea, given that we
already have all manner of rules governing the way employers treat
their workers, from the minimum wage to workplace safety
regulations. (Naturally, it would make more sense if the regulations
applied to all companies, rather than simply Wal-Mart.)

But this notion also assumes that the employer system is really
worth keeping--which may not be the case. The system made a lot
more sense back in the 1950s, when a breadwinner might spend
decades or a whole lifetime at one full-time job. That's not true
anymore. Besides, the employer system adds all sorts of perverse
economic incentives to health insurance, such as artificially
insulating workers from the true cost of medical care. That's one
reason some unionized retirees have been running up huge health
care bills, crippling the auto industry and other large
manufacturing companies.

The catch is that gutting the employer system requires a whole
different set of reforms. It is extraordinarily difficult for
somebody with previous medical conditions or a relatively low
income to buy private health insurance today. If employers don't
provide these people access to coverage, then the only realistic
way to avoid leaving them without coverage would be to construct a
government-run system with some combination of regulation (so that
people with serious medical conditions can find insurance coverage)
and taxes (so that people with lower incomes can have their
coverage subsidized). This is precisely the kind of system that the
business community and their conservative allies in the Republican
Party have always fought.

And they're still fighting. In the last election cycle, 80 percent
of the donations from Wal-Mart's political action committee and
individuals associated with the company went to Republicans, whose
opposition to anything resembling universal health care is
well-known. While Wal-Mart itself has not taken an official
position on national health insurance, it's not hard to guess what
the company would think about it. Suffice to say you won't hear
Wal-Mart championing France's universal health care system.
Wal-Mart is entitled to its opinion, of course. But, as long as it
blocks real health care reform, then it deserves every bit of grief
it's getting.

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