October 31, 2005

The Healthcare Struggle

Excellent article by Reed Ableson. Read it all, which overall presents a nicely balanced discussion. But once again, the idea of paying for healthcare is muddled with who should be providing it:

The Wal-Mart quandary involves a fundamental national issue: Who, if anyone, should provide care to the bulk of Americans.

"Whose responsibility is this?" said Carolyn Watts, a health professor at the University of Washington. "Is it the government's responsibility or the employer's?"

I presume doctors and nurses and pharmacists and technicians should be providing care, while people should be paying for their own routine care, and should be paying to insure against catastrophes. The real question then, is who will pay for care and insurance for those who cannot afford to pay their own way. Our answer has long been: the government.

Alex Tabarrok comments:

As the value of the wage component of the Wal-Mart benefit package has declined relative to the value of the health insurance component Wal-Mart has attracted more workers who want the job for the health benefits, i.e. sicker workers.
Should Wal-Mart try to make its current workers healthier?

UPDATE: Do you want to know which camp I am in? Arnold Kling's:

Health insurance costs will not fall for American workers unless costs in the health care system are reduced. I have spent considerable time looking into this issue, and my belief is that there is no free lunch. That is, none of the usual scapegoats for health care costs -- spending on the last year of life, excess profits of suppliers, administrative overhead, malpractice lawsuits -- is quantitatively large in relation to the level of health care services that Americans consume.

The only way to bring down health care costs is to consume less in terms of health care services. That in turn will require a major cultural change. One change could be centralized rationing of health care, with supply controlled by the government. Another change would be to dampen demand by switching consumers from comprehensive health insurance to catastrophic health insurance.

In the absence of cultural change, I believe that America will continue to be the leader in Activist medicine, with heavy use of specialists and technological apparatus. Activist medicine may or may not be the right way to approach health care. But it is the reason that health care in this country consumes such a large share of our GDP.

I am in favor of getting rid of employers as the health insurance Middle Man. I believe that employer-provided health insurance is inefficient and an economic distortion. However, it is important to recognize that America's large health care bills and the competitiveness of our large firms is not going to be much affected by changing to a different system.

Posted by Kevin at 8:26 AM

October 27, 2005

The Internal Memo: Exhibit 4

It seems worthwhile to discuss the internal memo in detail. After all, these are unadulterated Wal-Mart facts.

Exhibit 4 shows the percentage of Wal-Mart associates covered by health insurance compared to national employers as well as other retailers. Where does Wal-Mart come out? On top, on the bottom, and in the middle:


81% of Wal-Mart associates are eligible for health insurance, as opposed to 81% for national employers, but only 56% for retailers. 60% of those eligible choose to participate in Wal-Mart's plan, as opposed to 83% for national chains, and 63% for retailers. You multiply those numbers, and you find that 48% of Wal-Mart associates are covered by Wal-Mart's plan, far short of national employers average of 68%, but far more than other retailers' average of 36%. The data were culled from three separate surveys, a Wal-Mart internal survey, one in 2004 by Yankelovich, and the Kaiser/HRET Employer survey in 2003.

Later, we'll look at the juicier Exhibit 5...

Posted by Kevin at 10:19 AM

October 25, 2005

Why Not Recognize that Critics Had an Impact?

John Wagner writes about the new lower-cost health insurance plan:

What would be wrong with saying that sharp words from critics, coupled with input from employees about their needs, made the company realize that perhaps there were other options?

Good question. It's not a matter of morality -- right and wrong; it's a matter of strategy -- win or lose.

I think publicly recognizing that Wal-Mart critics had an impact on them will only embolden the critics to speak even more sharply, which is not in Wal-Mart's interest.

Personally, I think it's obvious that WM is partly responding to critics, but in this case, and in many others, Wal-Mart is not responding in the way that critics like. It is offering a lower-cost health-insurance option, when critics really want it to pick up the tab completely. It is offering to enforce quasi-Western standards in suppliers' factories, but critics are yelling that Wal-Mart is the cause of the manufacturing employment fall. It has been modifying the battleship grey and blue box to meet local design demands, but many critics don't want Wal-Mart at all, and accuse it of causing sprawl and destruction of rural communities. It is offering to lessen its environmental impact, but only in ways that will improve the bottom line. In other words, WM will not cooperate directly with its critics because they don't want cooperation. Neither will it recognize their contribution. Instead, WM has searched for partners to credit who are less vocal, and far more willing to accept changes that will benefit both WM and the public.

UPDATE: Mick Arran's views seem to confirm my suspicion that critics will just want more and more and more:

The problem here, of course, is that so many standard Wal-Mart practices are illegal/unethical/borderline criminal that nothing short of a complete makeover is going to do much good. They cheat and intimidate their employees, connive and manipulate to destroy their competition, browbeat suppliers, and in general treat the market as a place where, as far as they’re concerned, it’s their way or the highway.
What good does it do Wal-Mart to admit that these types of views inform its decisions?

I disagree that "many standard Wal-Mart practices are illegal/unethical/borderline criminal". As far as I know, nearly all of Wal-Mart's practices are retail standards. Those standards are too low for many of its critics, and an organization like Wal-Mart that won't revolutionize will always have mud slung at them.

Of course, Wal-Mart has violated laws, and many complaints against it are justified. However, I think it is unwarranted to abstract from individual cases of misconduct to general operating principles. And it seems to me that many people abstract not even from individual cases but from the beliefs of others around them.

As far as I know nobody has performed a study demonstrating that Wal-Mart is more lawless than competitors, when adjusting for size... anybody up for it?

Posted by Kevin at 11:29 AM

October 13, 2005

NYC Passes Health Act to Keep Wal-Mart Out of City

From the New York Post:

October 12, 2005 -- The City Council voted yesterday to override Mayor Bloomberg's veto of an anti-Wal-Mart bill aimed at making the retail giant and large grocery stores provide health-care benefits to their workers.

The Health Care Security Act, which the council has admitted is an attempt to keep big-box stores like Wal-Mart from setting up shop in the Big Apple, was opposed by the Bloomberg administration.

Kip Esquire, who has written several items about this Act, says,

...the Act codifies three simple principles of legislative intent:

--It is better to be unemployed than employed.

--It is better to pay higher prices than lower prices.

--It is better to have less variety than more variety.

K. Brancato adds: The New York Sun is reporting that the bill would actually put smaller grocers out of business. Uh-oh:

An official at a trade group that represents local grocery chains including C-Town and Met Foods, the National Supermarket Association, told The New York Sun that its member businesses, many of which have retail spaces between 15,000 and 20,000 square feet, would be devastated by the law.

As passed, the law would require grocery stores that are at least 10,000 square feet or have 35 or more employees to contribute a "prevailing health care expenditure rate."

"The amount of money that this will cost will put 40% to 50% of our people out of business," the executive director of the trade group, Luis Salcedo, said during a telephone interview.

These markets appear to be unintentional victims of the law.

Of course, the law will eventually be overturned anyway:
A spokesman for Mayor Bloomberg, Robert Lawson, said that with or without changes, the so-called Health Care Security Act violates federal law. The mayor has said that while he wants to get more people health insurance coverage, the council does not have the authority to regulate the plans that private businesses offer.

Posted by TheEclecticEconoclast at 5:59 AM

June 23, 2005

Becker & Posner on WM Health Insurance

Posner and Becker discuss Wal-Mart and employer-mandated health insurance. Lanny Arvan has an interesting post too.

Posted by Kevin at 11:06 AM

January 28, 2005

Domestic Partner Benefits at WM

This is both humane and a sensible move. It will have little impact on the bottom line, but may get gay rights groups to stop bashing WM:

According to Wal-Mart's (Research) ethics code, "Immediate family members include (whether by birth, adoption, marriage or Domestic Partnership or Civil Union, if recognized by your state or other local law) your spouse, children, parents, siblings, mothers- and fathers-in-law, sons- and daughters-in-law and brothers- and sisters-in-law."

Gay- and lesbian-rights groups praised Wal-Mart...

Still WM is being rather coy about this:
The Wal-Mart Stores Inc. policy change -- disclosed in a filing with the Securities and Exchange Commission on Wednesday -- accounts for the laws in some states that recognize domestic partnerships and civil unions, officials said.

Company spokesman Gus Whitcomb on Thursday declined to say if the change would affect employee benefits, or whether it meant Wal-Mart was taking a position on the issue of same-sex marriage or civil unions.

The Eclectic Econoclast sends in a link to Kip Esquire:
Markets in everything. Wal-Mart competes not only on price, and not only on wages, but on benefits as well. As a sort-of Wal-Mart competitor might have said: "It's a good thing..."

Posted by Kevin at 10:11 AM

November 9, 2004

Las Vegas Sun: Employers Should Pay for Employees' Healthcare

This Las Vegas Sun editorial demands that health care be paid for by employers, as if this would not have an absolutely devastating negative effect on worker's cash wages. It also abuses data:

To get a sense of just how poorly Wal-Mart treats its employees, it's illustrative to look at one of its discount-retail competitors, Costco. A story in Monday's New York Times noted that Wal-Mart asks employees to cover 33 percent of the costs for its health care plans. Add to that the low salaries that Wal-Mart pays, and it's not surprising that only 45 percent of its work force can afford the company's health insurance plan.
Unfortunately, there's no evidence that 55% cannot afford the health insurance plan. None at all. Zero. Nada. 45% of WM employees have the WM health care plan, 45% have some other plan, which presumably they CAN afford by working at WM. The editorial continues:
If businesses don't pay for their employees' health insurance, government-run hospitals that provide care for the indigent and for those without health insurance have to absorb the costs. Ultimately, taxpayers must pick up the tab, which means that we end up subsidizing the greed of Wal-Mart and other like-minded companies -- and they end up laughing all the way to the bank.
So let me get this straight. Emergecy doctors, whether they want to or not, must provide healthcare, regardless of ability to pay. Hence employers must pay for health insurance. How exactly does that follow? IT DOESN'T.

The editors imply that if employers don't pay for health insurance, a lot of people will not get it on their own, and they will all burden the system. WRONG!!!! True, some people will not get health insurance, but not all of them need or want it. Assume that all uninsured are a cost on the system. This is an argument that people be required to purchase some form of health insurance for themselves, not that their employers pay for it.

I don't see how it's WM's fault for doing nothing other than--completely legally--taking advantage of current government schemes? In fact, WM exposes a critical flaw in the current method. Doctors and governments should realize that if they provide incentives for employees to not pool healthcare costs,, some will take them up on the offer. The vast majority of these will be poor people.

You might want the poor to receive advanced medical treatment. But if you do, then you must recognize that most will either refuse to pay or cannot pay for it. One cannot hide these costs under the umbrella of "insurance" paid for by employers; whether "insured" or not, other people pay for their care in higher premia or higher prices elsewhere. (One can make the argument that a shift towards preventative care will save money and ease the ER crunch, but I'm not yet convinced it will save money).

Also, the editorial does not state why employers should not be required to pay for the food, housing, clothing, transportation, entertainment, or education of their employees. Aren't those just as

Posted by Kevin at 11:00 AM

November 5, 2004

WM Health Insurance in WI

The Shawano Leader has dome useful statistics about WM's legal use of Wisconsin state programs to make sure that its employees have health coverage:

The total enrollment of Wal-Mart employees and relatives in BadgerCare is 1,175 adults and 638 children. Additionally, another 1,952 children of Wal-Mart employees are insured under Medicaid.

The state of Wisconsin is providing health insurance for 3,765 people who are Wal-Mart employees or the spouses and children of Wal-Mart employees, according to Jim Malone, a spokesman for the Department of Health and Family Services.

Wal-Mart Stores Inc. has 25,861 employees in Wisconsin who earn an average of $10.36 per hour, said Sarah Clark, a spokeswoman at the company's Arkansas headquarters. Fifty-three percent of company employees in Wisconsin have insurance coverage through Wal-Mart, she said.

Posted by Kevin at 2:42 PM

November 3, 2004

Proposition 72 Barely Defeated

prop72.jpgThe California referendum that would have required large businesses to offer and pay for a large share of a wide range of health care coverage for employees has been defeated by a margin of 50.9% to 49.1%, a difference of 160,000 votes. Arnold got his way.

The California Restaurant Association fought hard against the measure, claiming it would force many restaurants to shut down. The restaurant lobby was joined by other business groups.

On Wednesday, the California Chamber of Commerce applauded the defeat of Proposition 72.

"This healthcare scheme would have cost at least $7 billion the first year alone -- and driven jobs out of California because employers would have had no choice but to shut their doors or move operations out of state because of this scheme," said California Chamber of Commerce President Allan Zaremberg.

Wal-Mart responds to the defeat:
Wal-Mart Stores (NYSE: WMT) issued the following statement on the defeat of Proposition 72 in California:

"Like the rest of the business community, we are pleased voters rejected
Prop. 72," Wal-Mart spokesperson Cynthia Lin said. "As one of California's
leading employers, we care about the health of our 60,000 employees here.
That's why we provide our employees with affordable, quality health care
coverage. We certainly support the goal of affordable health care for all
Californians. But as businesses, school districts, the Governor and even most
of the major newspapers in California have pointed out, Prop. 72 was not the
right approach."

Lin continued, "Prop. 72 was never about Wal-Mart. It was about allowing businesses to operate without unreasonable government mandates, it was about the survival of small businesses, and it was about consumer choice in health care benefits. California voters agreed, rejecting what would have been an extremely expensive, government-mandated health care plan."

Posted by Kevin at 8:59 PM

October 29, 2004

CA Dems to Investigate WM Healthcare Plan

I understand sincere motives to get better healthcare for the poor, but this seems more like political intimidation to me:

SAN FRANCISCO, Oct 28 (Reuters) - California lawmakers said on Thursday they would hold hearings to investigate claims that Wal-Mart Stores Inc. (WMT.N: Quote, Profile, Research) burdens the state with an unfair portion of the retailer's employee health-care costs.

Democratic members of the Senate Budget Committee also questioned whether California pension fund Calpers should consider selling off its estimated $1 billion investment in Wal-Mart stock because of the company's policies.

"The Senate Budget Committee will, as part of the budget process next year, investigate the extent that Wal-Mart does not provide coverage, and the extent that California taxpayers then pay for care for Wal-Mart's workers," said Senate Budget Committee chairman Wes Chesbro...

The decision to hold hearings follows Wal-Mart's aggressive campaign against a measure on the Nov. 2 ballot that would require larger employers in California to pay for health care coverage for workers.

On Tuesday, the world's biggest retailer said it would spend $500,000 to defeat Proposition 72 because supporters of the measure featured the company in a television ad claiming taxpayers paid millions more because Wal-Mart "won't provide affordable health coverage."

Walmart spokeswoman Cynthia Lin in a statement on Thursday said the advertisements claiming the company did not provide affordable health care were "outright lies" and that workers could get quality plans.

Posted by Kevin at 9:57 AM