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Wal-Mart: How low can you go?

Low prices. Always low prices. When it comes to consumer goods, America is addicted to them. And with its one-stop-shop product selection and fanatical commitment to low prices, Wal-Mart is the biggest low-price outlet going. We like our “stuff” cheap, and Wal-Mart is the place to get it.

The company that many Americans hate to love is getting loads of unfavorable attention lately. Union and activist groups have successfully derailed its growth plans in certain parts of the country. Now, a new documentary film casts the company in a decidedly unflattering light. As the title of Robert Greenwald’s, “Wal-Mart: The High Cost of Low Prices” (http://www.walmartmovie.com/) suggests, there is more to the cost picture than what one sees on the checkout receipt.

Wal-Mart’s single-minded focus on driving down costs applies to everything it does including, as we are now learning, how it treats employees. Recently, a confidential internal memo prepared by a team led by its head of employee benefits and sent to Wal-Mart’s Board of Directors got leaked to the media (See it here). The memo presents a rare inside look at the company, and in particular, how it views the tradeoff between costs, employee satisfaction and public reputation.

Not surprisingly, Wal-Mart sees labor as a growing cost to be rigorously controlled. And its juiciest target is health care – the company’s insurance costs are rising at a substantially higher annual rate than its sales (15% versus 11.9%). Refuting its skinflint image, Wal-Mart claims it provides coverage to a greater percentage of its employees than other retailers - 81% of Wal-Mart employees are eligible for health insurance while the retail industry average is 56%. But it’s expensive – only 48% of its employees are actually enrolled in its health insurance program. The retail industry is worse though – an average of only 36% of workers are enrolled.

Wal-Mart would like to get more credit for the benefits it already offers workers but admits its health care offering is “vulnerable to at least some of their (critics) criticisms, especially with regard to the affordability of coverage and associates’ reliance on Medicaid.” The memo acknowledges that 24% of employees and 46% of children of employees have no insurance or are covered by government Medicaid programs.
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The memo contains more sobering news about Wal-Mart’s workforce: “Our workers are getting sicker than the national population, particularly with obesity-related diseases. For example, the prevalence of coronary artery disease in Wal-Mart’s population grew by 6 percent compared to a national average of 1 percent, and the prevalence of diabetes in our population grew by 10% compared to a national average of 3 percent.” These statistics are sadly ironic given that the company is the country’s largest seller of the kinds of cheap, unhealthy food whose consumption is directly linked to these medical problems.

The memo goes on to note the negative impact of its workers' poor health on Wal-Mart's bottom line: "The cost of an associate with seven years tenure is almost 55% more than the cost of an associate with one year tenure, yet there is no difference in his or her productivity. Most troubling, the least healthy, least productive associates are more satisfied with their benefits than other segments and are interested in longer careers with Wal-Mart.”

Instead of proposing initiatives to help these workers become healthier and more productive, the team calls for redesigning Wal-Mart’s benefits package to better appeal to younger, healthier workers who are paid less and have shorter tenures. It hopes to weed out expensive, unhealthy workers by requiring more rigorous physical activity for jobs like cashier. Should anyone be surprised that a company that has built its business around selling cheap, disposable products wants a cheap, disposable workforce?

While Wal-Mart deserves to be criticized for these types of initiatives, the situation they and other businesses face illustrates how urgently our system of health care funding and delivery needs reform. The premiere quality of our healthcare system is often touted, but what good is this if fewer and fewer people can afford it?

This is not a new problem and it’s getting worse. When are we going to finally do something about it? Who in business and government is courageous enough to tackle the challenge of making healthcare widely available and affordable? What kind of country – let alone business and workplace environment – are we going to have if large and growing numbers of people cannot afford health care?

I’m not letting Wal-Mart off the hook – it certainly can and should do more. For example, you would think it would use its buying clout to negotiate the best health care deal for workers of any company in the U.S. But there is no denying that our biggest company and many other large corporations are struggling to keep pace with rising health care costs for their workers. Healthcare is the hot potato that no one wants to hold – not businesses, not government, not individuals. We should be collectively trying to solve this problem, instead of seeking to shift the burden to the other guy. Several state governments are now attempting to come to grips with this problem because they, and ultimately the taxpayers, must foot the bill for the growing number of people who can’t afford health care.

Just as Wal-Mart is evaluating the tradeoffs that best suit its interests, Americans need to start thinking about the bigger societal tradeoffs between price, individual quality of life and collective welfare. What good are businesses with “always low prices” on toothpaste if it means that neither they nor their workers can afford the cost of dental insurance? Are we really in favor of low prices at all costs? What kind of communities, workplaces and environments do we want? It’s time for everyone – politicians, business leaders, workers, citizens – to get our heads out of the sand and rethink our priorities. Our physical and economic health depends on it.

Is the cost and quality of your health care benefits getting better or worse? Please e-mail Tony at tdiromualdo@yahoo.com to share your thoughts and experiences.

Tony DiRomualdo is a business researcher, author and consultant. His work focuses on how changes in global business dynamics, talent management practices and information technology-enabled tools and capabilities are transforming the workplace. He helps individual leaders and teams to create Next Generation Workplaces. He can be reached at td@nextgenerationconsulting.com.

The opinions expressed herein or statements made in the above column are solely those of the author, and do not necessarily reflect the views of Wisconsin Technology Network, LLC. (WTN). WTN, LLC accepts no legal liability or responsibility for any claims made or opinions expressed herein.

Comments

Kevin Patrick responded 4 years ago: #1

I read with interest your article about Walmart and the high cost of health care. It was a very interesting article and certainly brought up some excellent points. However, I believe it missed the mark when the author incorrectly pointed out that Walmart is doing very little toward supplying its workers with health care. Health insurance is not "health care". It is a method to help pay for "health care". The rising cost of health care, which has made health insurance costs rise, lies with increased physician, hospital, and pharmaceutical costs. These have been exacerbated by both legitimate and frivolous malpractice suits, which many attorneys have no hesitation to pursue if it means more money to line their pockets. Health insurance costs continue to rise because of this and because of poor health maintenance by many Americans. The tobacco industry, the fast food industry and the "anything made with sugar" industries also help to add to the cost. Additionally, advances in medicine and surgical procedures give us access to the more expensive treatments, which weren't available 10 years ago. Four instance, quadrupal by-pass surgery is routine today...and still expensive.

In the article it is noted that Walmart is pushing to attract shorter term "healthier" people and working to push out those that are less healthy (even though they may have succumbed to that less healthy lifestyle by buying certain products at Walmart). While I agree that it would be far more altruistic to encourage its workers to adopt a healthier lifestyle, I'm wondering if it would do any good. We are talking about people, who can support their personal obesity and smoking habits on minimum wage and who choose to do so. It also sounds like many of these people choose to stay at Walmart because they can get away with being minimally productive and remain employed. If Walmart management can't encourage them to be more productive, how could they encourage them to be healthier. So Walmart sounds like that they've chosen to "raise the bridge" rather than "lower the river". From a business standpoint, this makes sense, as it sounds like they have accepted that their management is basically inept at true managing. It is likely that their managers are merely schedulers and that any management is reactive in nature. However, not having worked at a Walmart, I'm only speculating based on what I've read and heard.

Unfortunately for Walmart's nay sayers, this appears to work for Walmart. With the rise in gasoline prices, Walmart will continue to thrive as people will need more and more a "one-stop shopping place". The lower prices make it even more attractive.

However, I digress. My point is: Walmart really can't do a thing about "health care" for its employees. With regard to health insurance, negotiated group rates are based upon the health "experience" of the group covered. It sounds like Walmart's employees have some serious health issues, which would impact the cost of group health insurance. Additionally, negotiating for a lower rate because of higher numbers of employees is a simplistic view. If a significant percentage of the higher number of employees have health problems, the cost of the insurance would continue to be higher with a group plan. It would also be difficult to negotiate as a single body because of local and state insurance regulations and the limited number of health insurance providers, which are licensed in every state of the union. The cost of premiums would also vary from state to state. In some cases different insurance companies might have to be used to get the lowest premiums.
By the way, before you start thinking that perhaps individual insurance might be the answer, please know that many people who apply for individual insurance and who can afford it, won't qualify for it because of health problems. Based on the comments made by the Walmart executives, this would not be a viable solution either.

So what's the solution? Tort Law Reform is a good start. And if you want the government to get even more involved in providing health care to everyone, have them build and maintain hospitals and medical centers for people without health insurance. Have them pay the staff at the same rates they pay military medical personnel. Have them similarly protected against malpractice law suits. Will the best doctors and nurses go to work there? Who knows? Will people who can afford health insurance go there? Likely not. Will this increase taxes? Definitely. Where could the staff come from? Perhaps school loans could be forgiven by some contractual obligation to work in one of these hospitals.

Are these solutions part of "raising the bridge" or "lowering the river"? You be the judge.

mike kenny responded 4 years ago: #2

I have read the article on health insurance and the wal mart version. This is only the tip of the iceberg. Wal Mart is a very large employer. If they cannot provide decent health insurance to their employee how could a company that employs 10 of so employees do. They cannot. The answer does not lie in tort reform. That may help but it is not by any means a cure. The cure lies in the Federal Government. Private insurance and private medical facilities are not working and they will not work in the future. Unless you want to use a pay as you go plan. This would be used by the rich and rich only. The middle class on down could not afford it. So talk all you want and say the government should stay out. It is not and will not wark as it is today. The government has got to get involved and sooner or later they will. It really could not be any more expensive than it is today. Think about it.

Andrea Hanson responded 2 years ago: #3

I completely agree with Mike Kenny - health care should be a right not a privilege. Why are we willing to educate all children (even those here illegally) in this country, but not provide healthcare? Is getting an education more important than being alive?

There is a bill before Congress right now, HR 676 that would solve all of these problems and it would cost the government no more than they are currently spending and 95% of Americans would significantly save money as well. Here is some information for you:

State of healthcare today:
∙ According to the World Health Organization, the United States ranks 37th out of 191 countries in its overall health system performance and 72nd from the viewpoint of disease-adjusted life expectancy.
∙ Despite being a world leader in healthcare spending, the U.S. cannot seem to afford to bring everyone into the system - to provide healthcare coverage for all.
∙ The other advanced nations provide comprehensive coverage to their entire populations, while the U.S. leaves at least 45 million uninsured and another 50 million who are underinsured.
∙ Private insurers necessarily waste health dollars on things that have nothing to do with care: overhead, underwriting, billing, sales and marketing departments as well as huge profits and exorbitant executive pay. Doctors and hospitals must maintain costly administrative staff to deal with the bureaucracy. Combined, this needless administration consumes almost one-third of Americans’ health dollars.
∙ Because the U.S. does not have a system that serves everyone and instead has over 1,500 different insurance plans, each with their own marketing, paperwork, enrollment, premiums, rules, and regulations, our insurance system is both extremely complex and fragmented.
∙ The Medicare program operates with just 3% overhead, compared to the 15% to 25% overhead at a typical HMO.
∙ In the U.S. 18,000 uninsured people die prematurely annually due to lack of preventive care and early diagnosis (National Academy of Sciences).
∙ 45% of personal bankruptcies are due to medical bills.
∙ Large corporations are at a 16% disadvantage in the world market as a result of this flawed healthcare system.
∙ Small businesses are especially hurt by the current situation as they can’t afford to offer decent health insurance and therefore a lot of good employees can’t afford to work for them.
∙ The aim of our healthcare system should not be to make a profit for insurance and drug companies, it should be to provide affordable, high quality care for all Americans.
∙ The insurance and pharmaceutical corporations have continued to raise prices, their own profits, and their controls over doctors and patients, imposing a terrible crisis on all of us – poor quality care at unaffordable prices. Profits of insurance and pharmaceutical drug companies have multiplied during the same period that people’s healthcare has become less comprehensive and less affordable.
∙ Current statistics show that in 2001, 28% of middle class Americans with incomes between $20,000 and $40,000 were without healthcare at some point in the calendar year. By 2005, that number had risen to 41% of that income category (Leif Wellington Haase, The Century Foundation).

The solution to our country’s healthcare problem exists and it is already a bill being considered by Congress, H.R. 676. The power is in your hands. I urge you to write your Congress Members. H.R. 676 is the only sensible answer to the current problems.

Summary points on H.R. 676:
∙ 83% of those polled in the 2006 midterm elections say they want a government-supported national healthcare system.
∙ The plan would provide healthcare for all Americans.
∙ The plan would save $56 billion in overall healthcare spending while covering all of the uninsured. This is a 3% reduction in overall health care spending.
∙ It would ensure that all Americans will have access, guaranteed by law, to the highest quality and most cost effective health care services regardless of their employment, income, or health care status.
∙ The plan will cover all medically necessary services, including primary care, inpatient care, outpatient care, emergency care, prescription drugs, durable medical equipment, long term care, mental health services, dentistry, eye care, chiropractic, and substance abuse treatment. Patients have their choice of physicians, providers, hospitals, clinics, and practices. No co-pays or deductibles are permissible under this act.
∙ A huge portion of the federal budget would be moved into the public sector providing the opportunity for people to make their own decisions about spending their own money.
∙ Families would have more money in their pockets to spend on their other needs if we passed a single payer healthcare plan.
∙ A family of three making $40,000 per year would spend approximately $1900 per year for healthcare coverage compared to an average $11,000 now.
∙ People would have more choices and the economy would flourish with a new infusion of consumer capital and consumer confidence.
∙ People would be healthier in body and in spirit.
∙ Jobs will be created in the healthcare industry because there will be almost 100 million more people eligible to receive the healthcare they need.
∙ Competition based on quality of health care not price would be achieved.

Here is a story that is a really good example of what is wrong with healthcare in this country. Please take a moment to watch the video or read the magazine article (links below) about Thomas Wilkes' story. It is a very sad and tough situation for the family and their only real hope is a single payer system here in the United States. Please don't wait for something this tragic to happen to you or your family - help us take action now! A simple letter to your Congress members showing your support for HR 676 will make a huge difference. I have links below that you can click on to send that letter.

Thomas Wilkes' Story
http://www.youtube.com/watch?v=DNHNCScYpX8 (YouTube video)
http://www.calnurses.org/healthcare/assets/pdf/rn_mag_march2007_nathanwilkes.pdf (PDF of magazine article)

Write a letter/email
http://www.house.gov/writerep/ (write to your House of Representative)
http://www.senate.gov/general/contact_information/senators_cfm.cfm (write to your two senators)

Overview on Single-Payer system:
http://www.healthcare-now.org/

http://www.pnhp.org/facts/single_payer_resources.php

http://www.singlepayer.com

Short Video to explain Single-Payer system:
http://www.healthcare-now.org/presentations/singlepayer.html

FAQs:
http://www.pnhp.org/facts/singlepayer_faq.php?page=all

The Bill currently in Congress, H.R. 676:
http://www.healthcare-now.org/resources/hr676.htm

Full Text of the bill, H.R. 676:
http://thomas.loc.gov/cgi-bin/query/z?c109:H.R.676:

Sign the Healthcare Now Petition:
http://www.healthcare-now.org/petition.php

Sign a Petition for General Healthcare Reform:
http://www2.americanprogressaction.org/dia/organizationsORG/americanprogress/signUp.jsp?key=1218&t=HealthAction.dwt

What else can you do?
http://www.healthcare-now.org/action/index.htm

Please think long term – what happens when you have children and they need to go to the emergency room, what happens when you change jobs, what happens if you have to go on your spouse’s insurance, what happens when your parents need long term care, what happens if you or a family member faces a medical condition that requires long-term treatment, what happens if you are in an accident and taken to the ER where the doctor doesn’t take your insurance or worse yet the emergency surgeon doesn’t take your insurance, what happens when you want to retire early, what happens when you want to start your own business, etc., etc. We need to take action on this issue now and fix this for all Americans.

Please tell as many people as you can – family, friends, co-workers, HR department, church, organizations, etc. We need to get this information out there – there is a solution and we can get it implemented if enough people tell the government this is what they want. Please spread the word!!!

“Of all the forms of inequality, injustice in healthcare is the most shocking and inhumane." Martin Luther King, Jr
-check out www.healthcare-now.org for the solution

Ambien responded 2 years ago: #4

Yep, I think it's right.

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