Pity poor Wal-Mart. They’re discovering that over the next ten years, their healthcare costs are going to go through the roof. Desperate to cut costs, they are looking for innovative new ways to save money. They’re already trying the tried-and-true methods: hiring people for just barely less than full-time, so they won’t have to pay benefits; driving up the cost of the deductible to $1,000; and reducing contributions to employee’s 401k savings plans.
But still, the costs are going up. The New York Times got a copy of this internal memo discussing their healthcare cost initiatives. They found that (surprise!) when poor people have too little health care coverage, they end up costing more in the long run because they wait for easily treatable problems to become emergency room traumas.
Our workforce is aging faster (0.50 years per calendar year) than the national average (0.12 years per calendar year). [Because, perhaps, people in their prime earning years tend to not work at Wal-Mart if they can help it?]
Our workers are getting sicker than the national population, particularly with obesity-related diseases. [Because, perhaps, like other poor people, they tend to buy carb-laden staples instead of expensive fresh veggies?] 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. (That said, our workforce is no sicker at present in absolute terms than the national population.)
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. [Because, perhaps, poor people can’t afford the full cost of a doctor visit when their deductible is $1,000?] 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.
Wal-Mart’s got a serious problem on their hands. The fat, sick, and old employees are costing them a ton of money! Furthermore, the fat, sick, and old actually seem to like working at Wal-Mart.
While Associates are satisfied overall with their benefits, they are opposed to most traditional cost-control levers (e.g., higher deductibles for health insurance). Satisfaction also varies significantly by benefit and by segment of Associates. 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.
So what does Wal-Mart want to do to alleviate the situation? One possibility is tweaking the pay and benefits structure so that a long-term employee will want to leave Wal-Mart before they start earning increased pay and benefits…
The cost of Wal-Mart’s profit-sharing and 401(k) program and paid time off grew faster than overall Associate growth, due largely to increasing Associate tenure. Over the past 4 years, the average Associate tenure has increased by 0.2 months per calendar year. As a result, more Associates qualify for participation in benefits programs like the profit sharing and 401(k) plan and for more paid time off. An even more important factor is wages, which increase in lock-step with tenure and directly drive the cost of many benefits (e.g., 401(k) is a percentage of wages). 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.
…and another possibility is to discriminate against hiring the fat, sick, and old in the first place.
Given the significant savings from even a small improvement in the health of our Associate base, Wal-Mart should seek to attract a healthier workforce. The first recommendation in this section, moving all Associates to consumer-driven health plans, will help achieve this goal because these plans are more attractive to healthier Associates. The team is also considering additional initiatives to support this objective, including:
Design all jobs to include some physical activity (e.g., all cashiers do some cart gathering);
Offer savings via the Discount Card on healthy foods (e.g., fruits and vegetables);
Offer benefits that appeal to healthy Associates (e.g., an educational offering targeted at students).
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.
You know what else would dissuade unhealthy people from coming to work at Wal-Mart? Require all associates to run a two mile course in fifteen mintues. You’re sure to only get healthy, active people that way.
It’s interesting watching all these corporations coming to the realization that capitalism and health care aren’t mixing so well these days. We’ve been asking our companies to provide the health care that the government should be covering for way too long, and now they are starting to feel the pinch. They can see how low the healthcare costs are for their global competitors whose employee health care costs are largely covered by single-payer universal healthcare systems in the more progressive countries. Won’t it be fun in the next few years watching government-sponsored single-payer universal healthcare coverage for all Americans being pushed by the Corporate Right instead of the Hillary Left?
