Is Wal-Mart Doing Us A Favor?

There has been some interesting discussion in the New York Times in the past week about Wal-Mart and its health care policies.

Joseph Nocera wrote an interesting piece yesterday called Our Love-Hate Relationship With Wal-Mart (no link because its Times Select) where he made the point that as much as we hate the way they do business, we love the low prices they deliver to consumers. Americans have voted with their pocketbooks resoundingly in favor or Wal-Mart.

Today, there is a forum up on the Times website called Business Talk and the Question of the Week is:

An internal Wal-Mart memo that surfaced recently gave an unusually frank look
at its problems with uninsured workers. Is it Wal-Mart’s responsibility
to make sure that its lower-income workers have health care coverage,
or is it the government’s?

Instead of posting my response to that question on the forum, I’ll do it here on my weblog.

Wal-Mart, as we all know, has terrible health benefits for its employees. It’s competitors complain that they cannot compete with Wal-Mart because their health care costs make them uncompetitive.

But the fact is that employer paid healthcare is a ridiculous concept. If we just re-allocated all the dollars that employers pay for health care to the employees and let them buy healthcare themselves, we’d have a much more rational and efficient health care market.

The way it is now, the payor has no stake in the purchase.  That’s not a market, that’s irrational.

I should say that Union Square Ventures and every one of our portfolio companies, to my knowledge, provides attractive health care benefits to its employees.  I am not adverse to paying healthcare costs in my businesses.  I am just recognizing the inefficiency of this model.

So what is likely to happen is that Wal-Mart and others who just say no to employer paid health care are going to slowly and surely change the game in healthcare.

And we ought to get our heads around this and make the transition smooth for the employees. We need a way to let the employees save for and manage their healthcare spending.  Private insurance companies can provide this and are already doing so.  We also need the government to take a bigger role in catastrophic situations and providing healthcare to the unemployed where market forces cannot and will not work.

The government can also do some good at the low end of the pay scale.  It could, for example, increase the minimum wage by 20% and require employers to pay some percentage (like the same 20%) into a health care savings account.

I am not an expert in all the ins and outs of health care legislation but I believe that a first step to fixing the health care system in our country is to get employers out of this business of insuring the healthcare of their workers.  And so Wal-Mart, as evil as it’s practices are, may well be doing us all a favor and we should recognize the inevitability of it and get on with planning for life without employer paid health care.