Can Rising Healthcare Cost Be Stopped? Maybe Wal-Mart Can Pay for Them

In a novel approach to stopping the state’s skyrocketing Medicare costs, a controversial law has been passed in the state of

Maryland
. The law requires that large companies spend a portion of their payroll on improving employee health benefits. The purpose of the law is to encourage large companies to help contribute and to keep their employees off of the public’s tab when it comes to health care costs.

The law is written in a fashion that causes four large companies within the state to fall within the language of the law – Giant Food LLC, Johns Hopkins University Northrop Grumman Corp., and Wal-Mart Stores Inc.However, of these companies, all but Wal-Mart are either exempt or have measures in place that bring them in compliance with the law. So at the end of the day, Wal-Mart is the only private company to which the law would be applicable. As a result of this, when the bill was being debated by legislators in

Maryland
, it earned the name “the Wal-Mart Bill.”

Though the bill passed through the legislature, the governor of

Maryland
, Robert Ehrlich vetoed it. However, when the bill went back to the legislature, the veto was overridden and became law and is set to go into effect in January of 2007.

However, there is a question as to whether the law will ever go into effect. The Retail Leaders Industry Association (RLIA) has filed a lawsuit alleging that the law unfairly targets retailers, namely Wal-Mart, and restricts and limits the manner in which retailers can provide health benefits to their employees. Wal-Mart is also one of the RLIA’s largest members.

The numbers in question here are quite large. The law would require that Wal-Mart spend 8 percent of their payroll on employee health benefits, or, in the alternative, pay the amount to the state as a tax. This figure is approximately $6 million per year, quite a lot when one considers that this is but one state and not a very large one at that.

On Friday, June 23, 2006, arguments were heard in this matter in what will likely be the first step toward determining whether the law will go into effect as presently set, or whether legal measures will occur that will cause the law to be delayed or perhaps invalidated.

At the hearing, attorneys for both sides were quick to attack their opposition. Lawyers for the RLIA have argued that the law is “highly discriminatory.” The attorneys for the state of Maryland denied that the law was designed to single out Wal-Mart and that the law provided other alternatives such as setting up clinics for employees or even paying into a state insurance fund. However, the judge hearing the case, United States District Court Judge J. Frederick Motz had sharp word in response to the arguments from each side. When the attorneys for the RTLA argued that the law was discriminatory, Motz responded that where people had been targeted, such action usually made them vulnerable making reference to Wal-Mart’s record of health care benefits. When the state argued that Wal-Mart could set up health clinics for their employees, Motz quickly made it known that this argument didn’t meet his “silliness” test. He went on to explain that he felt it was silly to think that the health care needs of Wal-Mart employees would be benefited or adequately addressed by having Wal-Mart set up employee health care clinics.

Overall one of the most interesting arguments made by the state of

Maryland
was that the RLIA lacked standing to challenge the bill. Standing is a legal term that denotes whether a party to a lawsuit has an interest or a stake in a matter before the Court. Without standing, while a party may be concerned how the matter will be resolved, they have no foundation for being involved. The RLIA responded that even though the law only applied to one retailer, there was a potential for it to be applicable to others, perhaps even as many as all of their members. This is an interesting argument as on one hand, the RLIA argues that the law is discriminatory for singling out one member, but it argues that it could potentially apply to all members and needs to be dealt with as a result of this.

It will not be known for sometime how the judge will rule in this case. The judicial system moves slow and judges have many cases for which they are responsible. However, it is safe to say that a decision would likely come later this summer in order to allow both sides time for the necessary appeal – one which will likely be taken regardless of the winner at this level.

This matter is being closely watched by a number of other states and municipalities as it is a measure that is being considered in other areas – namely

Suffolk

County
in New York and the state of

Massachusetts
, both of whom are considering similar legislation in order to combat rising health care costs. The judge has indicated that he will consider the national implications of his ruling, a ruling that potentially could be influential in determining how and to what extent municipal and state governments have the power to set health care policy.

The point raised by this case is one of vital importance. Not to advocate that

Maryland
‘s approach is right or wrong, but it seems quite logical that states and local governments have an interest in keeping health care costs down and should be able to do something about it. To do so saves the public tax dollars and allows for resources to be used elsewhere. This statement will likely open a flood gate of questions that begin with an agreement to the proposition that states have such an interest, but then question whether retailers or other private businesses should have the burden of financing the remedy.

Using

Maryland
‘s as an example, their law provides for a percentage of the company’s payroll to go to health care initiatives for the employees, as a tax, being paid into a state insurance fund or being used to fund other programs such as health clinics. The focus is that the law allows for options. Maybe the funds don’t come from a payroll there is nothing to limit another standard from being used to determine the basis for the funding. The point made by counsel for the RILA was correct, the

Maryland
law has the potential to impact the retail industry as a whole and perhaps it should as not only retailers, but other corporations who should have an interest in the health and well-being of their employees.

The is the land of capitalism and commercialism. This drives our economy. However, the is also a land of excess. CEO’s of Fortune 500 companies, like Wal-Mart, routinely make multi-million dollar salaries. Corporate expenditures are at all times highs. Could perhaps some of these dollars be diverted to health care? Probably. Should companies be forced to pay $6 million annually in a single state, probably not?

One area that does give rise to concern in regard to this case is the larger issue of states attempting to address health care costs. If the law is invalidated, it will serve as a major disincentive to states trying to address and keep health care costs in check. This will mean higher taxes for the citizens of American as states have to pay more and more towards rising medical costs.

The equal application of the law is a cornerstone of the

. Large companies have a great deal of money and in the end, healthy consumers make healthy customers. The state has a clear interest in keeping health care costs down and the money to do it has to come from somewhere, but large companies don’t want to shoulder the burden alone. Within this argument is a balance, a balance that applies the approach started by

Maryland
, but expanded to apply equally to corporations of the entire industry to which Wal-Mart belongs. Approach this problem in this manner and everyone benefits by being healthier and likely more appreciative that corporate American is interested in more than what’s in your wallet.