Walmart has been circulating a confidential memo about their health care benefits, employees and profit margins. If you want to read the entire memo you may find it at this location :
http://www.nytimes.com/packages/pdf/business/26walmart.pdfhttp://walmartwatch.com/I have taken the liberty of extracting some of those items for your review. The first sentence is my summary opinion, the balance in quotes for each item is taken directly from the Walmart memo :
The only reason, it seems, to shop at Walmart is for the low prices. They are not good for their employees, their neighborhoods, their states or the nation.
Medicaid Supporting Walmart Stock Price :
“Wal-Mart’s healthcare benefit is one of the most pressing reputation
issues we face because well-funded, well-organized critics, as well as
state government officials, are carefully scrutinizing Wal-Mart’s
offering. Moreover, our offering is vulnerable to at least some of their
criticisms, especially with regard to the affordability of coverage and
Associates’ reliance on Medicaid.”
Breeding a Better Human and Interfering with Government :
“Redesign benefits and other aspects of the Associate experience,
such as job design, to attract a healthier, more productive
workforce.
– Make some select strategic investments in our healthcare offering
(e.g., lower maximum out-of-pocket expenses) so it can better
withstand external scrutiny.
– Improve communication of Wal-Mart’s benefits offering so we get
more credit for what we provide, and, over the long-term, work to
shape state and national outcomes on healthcare.”
Better Benefits to ‘Healthy’ employees :
“Maintaining benefits spend at or below today’s level as a percentage
of sales;
Offering a more attractive benefits package for healthy Associates;
Better positioning us to fight Wal-Mart’s critics.
We presented this material to the Executive Benefits Steering Committee (Tom
Hyde, Lawrence Jackson, and Tom Schoewe) in late July. They received the
recommendations enthusiastically and asked that we share them widely within
Wal-Mart, something we have begun to do.”
Walmart and the Elderly :
“Our workforce is aging faster (0.50 years per calendar year) than the
national average (0.12 years per calendar year).
¶ 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 percent compared to a national average of 3
percent.”
It’s the Government’s Fault :
“A segment of our workforce consumes healthcare inefficiently, in a
pattern similar to a Medicaid population. Our population tends to over
utilize emergency room and hospital services and underutilize
prescriptions and doctor visits. This pattern is most evident among our
low-income Associates, and one hypothesis is that this behavior may
result from prior experience with Medicaid programs.”
Full-Time, Loyal Employees are Bad :
“Given the impact of tenure on wages and benefits, the cost of an
Associate with 7 years of tenure is almost 55 percent more than the cost of an
Associate with 1 year of tenure, yet there is no difference in his or her
productivity (Exhibit 2). Moreover, because we pay an Associate more in salary
and benefits as his or her tenure increases, we are pricing that Associate out of
the labor market, increasing the likelihood that he or she will stay with Wal-Mart.”
The Employees are Parasites :
“In particular, the least healthy, least productive Associates are more satisfied with their benefits than other segments and are interested in longer careers with Wal-Mart.”
The Government Figured Out What Walmart has been Doing :
“Moreover, federal and state governments are increasingly concerned about healthcare costs, and many view Wal-Mart as part of the problem (a view due, in part, to the work of Wal-Mart’s critics). Medicaid costs are a major priority on most governors’ agendas; already a quarter of states are spending more than 25 percent of their budgets on Medicaid, and observers across the political spectrum assert that the current system – with spiraling costs, a large population of uninsured, and an increasing number of
medical bankruptcies – is unsustainable (although there is little consensus on
what should take its place). In this environment, we can expect efforts like those
in Maryland (which is trying to mandate that companies spend a certain
percentage of revenue on healthcare) and New Hampshire (which requires
health services to track where Medicaid enrollees are employed) to accelerate.
Proposals such as these, if successful, will bring added costs to Wal-Mart.
Moreover, these battles with critics and governments are contributing to the
decline of Wal-Mart’s overall reputation.”
Walmart Welfare :
“Specifically, our coverage is expensive for
low-income families, and Wal-Mart has a significant percentage of Associates
and their children on public assistance.”
Uninsured Employee Children :
“We also have a significant number of Associates and their children who
receive health insurance through public-assistance programs. Five
percent of our Associates are on Medicaid compared to an average for
national employers of 4 percent. Twenty-seven percent of Associates’
children are on such programs, compared to a national average of 22
percent (Exhibit 5). In total, 46 percent of Associates’ children are either
on Medicaid or are uninsured.”
Doctor Walmart :
“Continue to explore adding health clinics in stores. Wal-Mart is
starting an effort to put clinics in stores, a strategy currently framed as a
real-estate opportunity. Over the long term, and with several important
modifications (e.g., innovations to create lower-cost visits), these clinics
could become an important part of our healthcare strategy, especially as
a substitute for emergency room visits.”
The Republican Answer :
“Overall consumer-driven health plans are less popular with
Associates than traditional plans, albeit not dramatically so, and are more difficult
to communicate. Strong opposition is isolated to approximately 10 percent of
Associates. Wal-Mart will also face reputation challenges in implementing this
change given that progressives view such plans as a “Republican answer.”
Wal-Mart will have to be sophisticated and forceful in communicating this change
internally and externally.”
Social Security Will Take Care of Them :
“We should also redesign the specifics of our retirement program. In particular,
we should convert the 401(k) program from a “no-strings-attached” flat
contribution to a matching program in which Associates receive funds from Wal-
Mart based on the contribution they make to their 401(k). Such a program would
help Associates better prepare for retirement. A fully participating career
Associate would be able to replace 30 to 40 percent of his or her income at
retirement, compared to 15 percent today, resulting in some 80 to 90 percent of
income replaced at retirement (when Social Security is included).”
Hire ‘Healthier’ People :
“A healthier workforce will lead to lower health insurance costs, lower
absenteeism through fewer sick days, and higher productivity. It will be far easier
to attract and retain a healthier workforce than it will be to change behavior in an
existing one. These moves would also dissuade unhealthy people from coming
to work at Wal-Mart.”
‘Reframe’ (Lie) About Medicaid :
“Address the Medicaid issue head-on by reframing the debate (e.g., this
is everyone’s problem, not just Wal-Mart’s) and by offering some type of
counterproposal or compromise. This first effort is critical because
Wal-Mart is under serious attack from state governments with regard to
the number of Associates on publicly funded health insurance.”
Talk Loud and Carry a Big Stick :
“Become more engaged in the national healthcare debate, to position
Wal-Mart as a leader in healthcare in general and on access (e.g.,
individual mandates) and affordability (e.g., bringing IT to healthcare) in
particular. Establishing Wal-Mart as a leader on this critical issue will
help deflate our critics. It will also put us in a position to help shape the
outcome of the public debate about the healthcare crisis in a way that is
at least somewhat advantageous to our interests.”
Medicaid is Better than Walmart Benefits :
“Public reputation risk. Healthcare enrollment will fall several
percentage points due primarily to a shift to more part-time Associates,
which could draw additional attacks from Wal-Mart’s critics. Also,
despite the proposed efforts, the Medicaid problem will not be “solved.”
A significant number of Associates and their children will still qualify for
Medicaid. Because many of these programs will offer more generous
health insurance than Wal-Mart provides, many Associates will still
choose to enroll in Medicaid, leaving the door open for continued
attacks.”
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