I really have to wonder what's going on in the Maryland state legislature. Lawmakers there have pressed ahead with a measure, overriding a veto, that will require Wal-Mart (NYSE:WMT) to pay a guaranteed 8% of its payroll to health care, or send the difference into state coffers. Technically, the law applies to any firm employing over 10,000 Marylanders, but it's well known that Wal-Mart was the sole target for the bill.
Don't get me wrong here. I'm one of those pinko-liberal-hippies who believe that people should have access to some reasonable level of medical care. But in my experience, state politicians have the worst ideas about how to get there. Until now, I thought the Revolutionary People's Republic of Minnesota took the prize, with its program that puts a tax on doctors, spends far less than it collects, and works hard, along with insurance providers, to hide the fact that the tax is passed right back onto consumers by insurance companies and health-care providers. (Go Minnesota!)
Simple,
or simple-minded?
But the new Maryland provision is in the running for the game ball. It proves to me, for the umpteenth time, that what makes nice, popular politics may also make terrible public policy. Let's get real. A percentage is meaningless. It doesn't guarantee widespread access or quality care. As my colleague Stephen Simpson noted, the bill as written would seem to allow Wal-Mart to spend millions on pricey programs that would allow tummy tucks and nose jobs for top Maryland brass while denying low-wage earners health-care coverage -- so long as those costs still came to 8% of payroll. And why is the magic cutoff 10,000 employees? Why not 1,000? Or 100? Or 10? (Because that, of course, wouldn't have been nearly as popular. Even Democratic legislators have friends at companies that employ those numbers.)
That's why the do-gooder claims of this bill's supporters ring so hollow. It's always looked like a way for unions and Wal-Mart competitors, like Dutch behemoth Royal Ahold (NYSE:AHO) -- which competes with Wal-Mart through its subsidiary, Giant -- to take swings at their particular boogeyman.
A couple of interesting tidbits in a Washington Post article today reconfirm that suspicion. Wal-Mart notes that of the nearly 800,000 uninsured citizens in Maryland, less than half a percent of them work for Wal-Mart. And, throwing a bit of cold reality onto the cheering partisans in Maryland, who hope that their victory will reverberate throughout our land, the U.S. Chamber of Commerce told the Post that of the 45 million uninsured workers in the U.S., more than half work for companies with less than 10 employees. Clearly, punishing Wal-Mart isn't going to solve this problem.
Problem,
or solution?
Need I mention that Wal-Mart actually came up with a revamped health plan for its employees a while back that offers coverage for as little as $11 a month? Dare I suggest that hefty companies like Wal-Mart or Costco (NASDAQ:COST) might someday actually emerge as the unlikely solutions to some aspects of our national health-care cost crisis?
Bear with me: They are among the few companies large enough, or smart enough, to put the pinch on health-insurance companies, thus providing the opportunity for individuals or small businesses in their membership pools to get access to health-care coverage at prices they would not otherwise be able to negotiate alone. (Costco's already done just that.)
Whole Foods Markets (NASDAQ:WFMI) has used other creative programs to tackle health-care costs that might hamstring less innovative competitors. But if Whole Foods had 10,000 employees in Maryland, it wouldn't matter how good its health plan was. If it didn't meet legislators' arbritrary 8% figure, the firm would have to pay up.
That's the bottom-line tragedy of this bill. It's the laziest solution available. Why rely on innovation when you can go with the bludgeon? Worse yet, I suspect Maryland will have just unleashed all of Wal-Mart's innovation on concerns that won't help Maryland at all.
You steal from Wal-Mart here, and it's going to collect the tithe somewhere else. That might mean wage pressure. It might mean higher prices for Wal-Mart shoppers in Maryland. It might mean acceleration of automation projects in order to keep fewer employees around. It might mean store closings. It'll put Maryland last on the list for regional distribution centers or any other kind of employment-providing expansion. I can't even speculate on what else it might mean, because the folks who run Wal-Mart are a heck of a lot cleverer than I am. But I guarantee you they're already thinking about it.
In a battle for money, where are you going to place your bets? On the guys who built the world's biggest retailer and made it an unprecedented profit machine? Or a gaggle of state legislators whose concept of health-care reform is no more sophisticated than a few digits plucked from thin air?
Fair is fair
Truth be told, Wal-Mart hasn't always played its best hand with communities. Indeed, in Maryland, it was recently planning to make an end-run around zoning by building two stores where a single large location would have been in violation. The company was smart enough to drop that plan in response to community outcry.
But Wal-Mart's done some bullying in other places, too. It tried to steamroll its way into a California neighborhood, and attempted to rewrite zoning laws with a spooky ballot initiative that would have let it, by spending its way to only a 51% margin in the first election, restrict any future elective action to initiatives carrying an all-but-impossible two-thirds majority. And don't forget that Wal-Mart once compared people who were opposing one of its developments to Nazi book-burners. (Why is it that I can't, in a million years, imagine the folks at Target (NYSE:TGT) making the same kind of ham-fisted PR mistake?)
Foolish bottom line
For shareholders, there's at least one unpleasant takeaway. Clearly, Wal-Mart has a lot to learn about the way it presents itself as a corporate citizen. As I wrote before on this issue, when a misguided, soak-the-rich public sentiment combines with angry, disingenuous corporate competition and politicians looking to score points with their constituencies, it can mean trouble -- even if it doesn't make sense. Now, shareholders may find out what trouble costs.
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Seth Jayson wants everyone to be healthy, but he figures dumb ideas from politicians won't get us there. At the time of publication, he had no positions in any company mentioned here. View his stock holdings and Fool profile here. Fool rules are here.
