Health Inspection

by Jonathan Cohn | June 20, 2005

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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