Mallaby, Tierney offered misleading Wal-Mart defense

››› ››› JEREMY SCHULMAN

In his November 28 Washington Post column, Sebastian Mallaby offered a misleading defense of Wal-Mart Stores Inc.'s controversial employee health care policies, writing that the 5 percent of Wal-Mart workers receiving Medicaid -- government-funded medical assistance for the poor -- is "a typical level for large retail firms." In a similar November 29 New York Times column, John Tierney responded to criticism that some of Wal-Mart's employees "rely on Medicaid for health care and on other government aid" by pointing out that "so do some employees at other companies or at government institutions like public schools." Neither columnist informed readers that, according to researchers at the University of California-Berkeley's Labor Center, the percentage of children of Wal-Mart employees who are on Medicaid or the State Children's Health Insurance Program (SCHIP), or who are uninsured, is significantly greater than the percentage for all large retailers.

From Mallaby's November 28 Washington Post column:

Wal-Mart's critics also paint the company as a parasite on taxpayers, because 5 percent of its workers are on Medicaid. Actually that's a typical level for large retail firms, and the national average for all firms is 4 percent. Moreover, it's ironic that Wal-Mart's enemies, who are mainly progressives, should even raise this issue. In the 1990s progressives argued loudly for the reform that allowed poor Americans to keep Medicaid benefits even if they had a job. Now that this policy is helping workers at Wal-Mart, progressives shouldn't blame the company. Besides, many progressives favor a national health system. In other words, they attack Wal-Mart for having 5 percent of its workers receive health care courtesy of taxpayers when the policy that they support would increase that share to 100 percent.

From Tierney's November 29 New York Times column:

Wal-Mart is often denounced for getting ''corporate welfare'' because some of its employees rely on Medicaid for health care and on other government aid. But so do some employees at other companies or at government institutions like public schools. Wal-Mart offers health benefits that are generally comparable to what other retailers offer.

Both Mallaby and Tierney cited New York University visiting scholar Jason Furman's November 14 paper, "Wal-Mart: A Progressive Success Story," as the source for their columns. Indeed, Furman noted that "[i]n total, 5 percent of Wal-Mart employees are on Medicaid, which is similar to the percentage for other large retailers and is comparable to the national average of 4 percent." Furman's source for this comparison was an internal memo written by M. Susan Chambers, Wal-Mart's executive vice president for benefits. The New York Times reported on Chambers's memo in an October 26 article. But Furman, Mallaby, and Tierney all failed to reveal that in that same paragraph of the Chambers memo, Chambers acknowledged that children of Wal-Mart employees receive Medicaid or SCHIP at a significantly higher rate than the national employer average.

From Chambers's memo:

We also have a significant number of Associates [employees] 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.

In a supporting exhibit, Chambers's memo claims that 36 percent of all retail employees' children are on Medicaid or SCHIP -- a figure that exceeds Wal-Mart's 27 percent. However, an October 26 paper by researchers at UC-Berkeley's Labor Center presents a very different conclusion. Using data from the 2005 Current Population Survey, the UC-Berkeley researchers "analyzed the difference between Wal-Mart's reported numbers and those for large retailers in general (defined as those with 1,000 or more workers)." They found that "22% of children of employees of large retailers are enrolled in Medicaid/SCHIP, compared to 27% reported by Wal-Mart for their employees' children." In contrast to Wal-Mart's claim, the UC-Berkeley researchers reported that only 22.7 percent of children of all retail employees are enrolled in Medicaid or SCHIP. Additionally, they noted that the gap between Wal-Mart and other large retailers grew even larger when they examined the percentage of employees' children who are either on Medicaid/SCHIP or uninsured:

We also find that 7% of the children of employees of large retailers are uninsured, compared to 19% reported by Wal-Mart. While 46% of the children of Wal-Mart workers are either uninsured or on Medicaid/SCHIP, the comparable figure for children of all large retail workers is 29%. Wal-Mart workers are less likely than workers in all large retail to have job based coverage (48% compared to 54%). Wal-Mart workers' enrollment in Medicaid nationally is similar to large retail as a whole.

As Media Matters for America has noted, a previous UC-Berkeley report, published August 2, 2004, "found that... families of Wal-Mart workers in California relied on public health insurance programs and other means-tested welfare programs at a far greater rate than families of all large retail employees." In their October 26 paper, the researchers stated that Chambers's memo "provides data from Wal-Mart that validates the basic findings of that UC Berkeley report."

Among the report's findings are the following:

  • The families of Wal-Mart employees in California utilize an estimated 40 percent more in taxpayer-funded health care than the average for families of all large retail employees.
  • The families of Wal-Mart employees use an estimated 38 percent more in other (non-health care) public assistance programs (such as food stamps, Earned Income Tax Credit, subsidized school lunches, and subsidized housing) than the average for families of all large retail employees.

Tierney's claim that Wal-Mart "offers health benefits that are generally comparable to what other retailers offer" is also misleading.

While Furman did assert in his paper that "Wal-Mart's health benefits are similar to or better than benefits at comparable employers," he based his claim largely on the fact that the percentage of workers covered by Wal-Mart's plan -- as well as the deductibles and employer/employee cost-sharing -- is in line with retail industry averages. He further pointed out that, unlike most retailers, Wal-Mart's health plan has no lifetime maximum benefit and is available to part-time workers. He provided no examination of the quality of Wal-Mart's plan when compared with those of other large retailers.

Yet Wal-Mart apparently uses a number of tactics to cut its own benefits costs, at the expense of its employees, that comparable businesses do not use. Citing estimates by Mercer Human Resources Consulting, a September 30, 2003, Wall Street Journal article reported that in 2002, Wal-Mart spent 30 percent less on health benefits per covered employee than the rest of the "wholesale/retail industry" and 40 percent less than the average U.S. company.

From the September 30, 2003, Wall Street Journal article by Bernard Wysocki Jr. and Ann Zimmerman:

Wal-Mart Stores Inc. is famous for cutting costs everywhere it can. Today a giant target for the world's biggest retailer is the health-care costs of its employees.

Wal-Mart makes new hourly workers wait six months to sign up for its benefits plan and doesn't cover retirees at all. Its deductibles range as high as $1,000, triple the norm. It refuses to pay for flu shots, eye exams, child vaccinations, chiropractic services and numerous other treatments allowed by many other companies. In many cases, it won't pay for treatment of pre-existing conditions in the first year of coverage.

The payoff: Last year, average spending on health benefits for each of the company's roughly 500,000 covered employees was $3,500, almost 40% less than the average for all U.S. corporations and 30% less than the rest of the wholesale/retail industry, according to estimates by Mercer Human Resource Consulting, a unit of Marsh & McLennan Cos.

In addition, according to the Kaiser Family foundation's Employer Health Benefits 2005 Annual Survey, the average retail industry waiting period for health coverage is three months. Wal-Mart's six-month waiting period is double the retail industry average -- a fact that Furman acknowledged but Tierney did not.

Posted In
Economy, Health Care
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