The Wal-Mart Memo

A memo written by a top Wal-Mart executive proposing ways for the company to reduce its ever-rising health care spending has created quite a kerfuffle. (See coverage in the New York Times here and here, and in the Los Angeles Times here.)

Some of the main points of the memo, written by Executive Vice President for Benefits M. Susan Chambers, were:

• Wal-Mart's health care costs have been rising on average 15% a year since 2002.
• 46% of children of Wal-Mart employees have no private health insurance.
• "Wal-Mart workers 'are getting sicker than the national population, particularly in obesity-related diseases,' including diabetes and coronary artery disease."
• Wal-Mart should consider ensuring that all jobs "include some physical activity (e.g. all cashiers do some cart gathering)." The idea would be to "dissuade unhealthy people from coming to work at Wal-Mart."

Based on this memo, labor leaders have accused Wal-Mart of wanting to offer health care coverage only to healthy people. (See article in the Philadelphia Inquirer.
I have some observations.
This is a new, more vivid example of the perverse incentives that arise out of the curious US practice of having employers provide health insurance coverage to a large number of US employees. This practice arose during World War II, when wage controls lead employers to compete for scarce labor by offering more benefits instead of higher salaries, and was reinforced by the US tax code, which allows employers, but not employees, to deduct the cost of health insurance from income for tax computations. We previously mentioned how some US companies have fired employees who smoke in the privacy of their own homes in order to make their work-force healthier and hence cut their health care insurance bills.
The memo seems to reflect the growing belief that most ills are somehow self-induced. Note that the memo seems to reflect the belief that coronary artery disease (CAD) is mainly a result of obesity. However, the most recognized risk factors for CAD are male sex, increasing age, high blood pressure, cigarette smoking, high total cholesterol, low HDL cholesterol, diabetes, and left ventricular hyptertrophy (from the Framingham study risk equations. See Anderson KM et al. Cardiovascular disease risk profiles. Am Heart J 1990; 121: 1293-1298.) Some of these can be modified, and some may be indirectly related to obesity, but the notion that a thinner work force will necessarily have less CAD, or will generally have lower health care costs, is overly simplistic. I wonder whether the belief in the exaggerated importance of obesity (now redefined to include nearly everyone who is a bit overweight) as a cause of disease arose out of stealth marketing campaigns for anti-obesity drugs, like the Wyeth campaign in support of the ill fated Fen-Phen drug combination. (See our post here, and the article: Elliott C. Pharma goes to the laundry: public relations and the business of medical education. Hastings Center Rep 2004; 34: 18-23.)
Notably lacking from the memo is any consideration of lowering health care costs by bargaining down egregiously high prices for certain goods or services. Yet Health Care Renewal has featured numerous examples of unjustifiably high charges for particular goods and services (See our post entitled "Wooden-Headed Health Care Reimbursement.")