All roads lead to Wal-Mart

In Calling Wal-Mart Stupid I listed multiple reasons why it is in Wal-Mart’s interest to back mandatory health insurance rules for employers. The National Retail Federation called the move, “the single most destructive thing you could do to the health-care system shy of a single-payer system.” But after reading three seemingly unrelated stories in today’s Wall Street Journal, I’m even more convinced that supporting the mandate makes sense for Wal-Mart.

  • Slump Spreads to Health Care As Michigan Loses Auto Jobs highlights the plight of laid off workers in the auto industry and supporting fields, who’ve gone from rich to poor as a result of having to pay for their own health insurance. Not surprisingly health care providers in the state are suffering financially, too as their patient base loses out. Ironically, as car companies have downsized over the past several years, the state has encouraged former employees to retrain for the health care field. Health care is now the leading industry in Michigan but contrary to the hopes of some wishful thinkers, health care providers can not drive overall economic growth!
  • Sick and Getting Sicker, which leads off the Small Business Report announces that the high cost of health insurance is preventing entrepreneurs from starting up companies. “For years, small businesses have griped about the burden of rising health-care costs and warned that the situation was near a crisis point. Well, it’s fair to say that the crisis point is here.” This is a theme I’ve been onto for some time. (See for example, When socialism is good for capitalism) And while I hate to be negative, the potential solutions described in the article –like letting businesses band together in cooperatives to negotiate for better health insurance rates– are just not going to have a big impact. Small businesses historically are the big job creators jobs in a recovery, so we are in for some very serious trouble if they continue to be held back.
  • Trade Group Challenges Wal-Mart on Health Care reports on the continuation and intensification of the reaction I described in Calling Wal-Mart Stupid. The retail establishment is apoplectic about Wal-Mart’s call for an employer mandate, figuring it will hurt their businesses and put them at a disadvantage to Wal-Mart.

So why does Wal-Mart’s move make so much sense?

  • On the more obvious side, Wal-Mart’s Michigan customers are pretty useless to the company if they can’t pay their mortgage or health insurance. And Wal-Mart has been turned from villain to ally of health reform advocates at a time when reform is popular and likely to pass. The contrast is even starker for Wal-Mart with its competitors barking like crazed beasts.
  • More fundamentally, in the long term Wal-Mart may have the chance to completely restructure the delivery of health care in the US. At a time when the company is facing a falling off of traditional growth opportunities, health care delivery represents a $1 trillion opportunity to transform the industry and make big profits. I’m not talking about small-scale clinics, which Wal-Mart has had trouble with. I’m thinking more along the lines of what Wal-Mart is already doing with its $4 generic program. If the company plays its cards right, it can do to health care what Southwest Airlines has done to aviation, only on a larger and more sweeping scale. If employers all have to provide health insurance it will also ensure a gigantic, stable base of business.
July 13, 2009

3 thoughts on “All roads lead to Wal-Mart”

  1. Great post — I like you way that you brought together these disparate stories.

    It’s surely no coincidence that Walmart launched its first mail order pharmacy for Michigan residents.
    http://www.drugchannels.net/2009/05/wal-mart-aims-at-pbm-mail-profits.html

    They are experimenting with multiple ways to reduce costs for health care delivery. Of course, one player’s cost contributes to another player’s margin, so Walmart will never be popular in health care.

    Regards,
    Adam

  2. “contrary to the hopes of some wishful thinkers, health care providers can not drive overall economic growth!”

    No truer words have been spoken!

  3. I was expecting you to mention the possibility that such a burdensome regulation on potential and existing competitors will keep Walmart (whose size and bargaining power clearly extend beyond retail) profitable in markets where others cannot.

    This theory could apply to a host of businesses’ policy espousals.

    The second reason I completely agree with. As for the first, I’d almost consider Walmart to be an inferior good. If so, financial troubles would mean more sales.

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