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Wal-Mart Uses Connections to Influence Health Care Reform

August 13, 2009
As public battles over health care reform erupt in the districts of congressional leaders, employers and their lobbyists are privately pressing their reform agendas in Washington.

Among employers most active in shaping health policy is Wal-Mart. As the nation’s largest employer, Wal-Mart has waded deeper than any other company into the national health care debate, spending heavily on lobbyists, forming strategic alliances with union leaders who now have access to the Obama administration and even bucking the business establishment by endorsing a requirement that all employers provide health insurance to employees.

A look at the Bentonville, Arkansas, company’s public and behind-the-scenes activities to shape health care reform shows how money, ideas and personal relationships are marshaled to affect federal policy. If the company is successful in moving its agenda forward, employers across the country could find themselves responsible for meeting new federal health care requirements.

While the company has proposed ways to help bring costs down, its support of an employer mandate has been the most contentious issue within the employer community. According to lobbyists who work for Wal-Mart, the company hopes that its current health benefits would meet any government requirement that employers provide health coverage to workers. Doing so would keep Wal-Mart’s costs the same while raising costs for competitors that don’t yet provide health coverage to workers.

Another Wal-Mart goal is to ensure that companies that provide health care are not penalized if, instead, their workers choose a government-run health program, such as Medicare, Medicaid or even a public plan option that is under consideration.

Wal-Mart officials say privately that their policy prescriptions, while potentially good for their business, can also help bring down overall health care costs for other employers. One such proposal is a “trigger mechanism” that would automatically lower reimbursement rates to health providers if medical inflation spiked above a predetermined level.

While many of these ideas were unveiled in a letter to President Barack Obama recently, much of the company’s policy strategy can be traced back three years. At that time, Wal-Mart was looking to improve its corporate image, which had taken a beating by union campaigns that had criticized the company for not providing better health benefits to its employees, most of whom work for low wages. Thanks to a federal judge’s ruling in July 2006, Wal-Mart avoided having to comply with a Maryland law that would have required the company to spend more money on health care for its employees.

A month later the company hired Leslie Dach, a former Democratic strategist and vice chairman of public relations firm Edelman known for forming alliances among differing constituents, as its executive vice president of corporate affairs and government relations.

Then, in February 2007, Wal-Mart surprised many by joining forces with a union and a left-leaning think tank to press for health care reform. The Better Health Care Together coalition made headlines less for policy reasons than the unusual alliance between the anti-union Wal-Mart and one of the country’s most influential labor unions, the Service Employees International Union, run by Andy Stern, and the Center for American Progress, a liberal think tank founded by John Podesta, former chief of staff to President Bill Clinton.

That year, according to federal records, Wal-Mart also began spending heavily on lobbyists who would work behind the scenes to advance the company’s agenda.

In 2007, the company increased its total lobbying spending to $4 million from $2.4 million a year earlier. Last year, an election year when spikes in lobbying spending are to be expected, Wal-Mart spent $6.6 million on lobbying, 50 percent more than in 2007.

Over the course of 2009, as health reform has gotten under way, the retailer has increased its spending on internal lobbyists to $2.58 million in the second quarter from $1.6 million in the first. At this pace, Wal-Mart is on track to spend more than $8 million on its lobbying efforts, a record amount for the company.

The company is not required to say how much it spends on any one area. However, in its filings it does disclose that among the issues it works on is health care and health care reform.

A Wal-Mart lobbyist, who spoke on condition of anonymity, says the company has focused its lobbying efforts on several pieces of pending legislation, including proposals to tax offshore corporations and increase fees on sugary drinks.

Its main focus of late, though, has been health care reform and opposing the Employee Free Choice Act, which would make it easier for workers to unionize—a stance that puts the retailer at odds with unions including SEIU.

One of the outside lobbyists Wal-Mart hired is the lobby group founded by Podesta and run by his brother Tony, a prominent Democratic fundraiser. Since 2007, the Podesta Group has received $1.08 million from Wal-Mart, making it the company’s highest-paid outside lobby firm, according to federal records.

According to filings, John Podesta is no longer a registered lobbyist and Tony Podesta has not been listed as a lobbyist working on the Podesta Group’s Wal-Mart account since 2007. Still, observers say Wal-Mart’s ties with influential Washington insiders are bound to increase the company’s influence over federal health policy.

“Someone like John Podesta, who has a very significant history in government service, is part of the revolving door, lobbying the very institutions they used to work for on behalf of special interests,” says Dave Levinthal, a spokesman for the Center for Responsive Politics, also a government watchdog organization. “We see this a lot, especially with the health care debate.”

Bill Allison, a senior fellow at the Sunlight Foundation, a group that promotes transparency in government, says it would be unusual for people with close relationships, especially brothers, not to talk about the work they do.

“Most brothers return each other’s phone calls,” Allison says. Having the Podesta Group as clients “certainly cements Wal-Mart’s relationship with [the Center for American Progress].”

The Wal-Mart lobbyist, who was not authorized to speak on the record, says that the organizations run by John and Tony Podesta do not work on the same issues.

“I’ve never heard John and Tony’s name mentioned in the same sentence,” the lobbyist says.

The Center for American Progress, to which Wal-Mart’s charitable foundation contributed $503,839 last year, did not respond to several requests for comment for this story.

A Wal-Mart spokesman says the company’s relationships with the SEIU and the Center for American Progress is based on a shared desire to reform the health care system. “We said in February 2007 that we wanted to work with SEIU and CAP to address the challenges the country faces in the health system,” says Wal-Mart spokesman Greg Rossiter.

With the election of Barack Obama as president, the early alliance with the Center for American Progress and the SEIU has proved to be prescient. In addition to John Podesta, who also headed Obama’s transition team, there are now a number of former SEIU executives working inside the White House.

And SEIU president Andy Stern, who has boasted of his access to President Obama and the $60 million his union spent to get Obama elected, has said in published reports that he visits the White House once a week. Stern has said one of his main policy priorities is health care reform.

So far Wal-Mart says it is happy with the results of its lobbying effort. On June 30, Wal-Mart CEO Mike Duke, who replaced CEO Lee Scott in February, penned a letter co-signed by Stern and John Podesta that angered many in the business establishment by calling for a requirement that all employers provide health coverage—provisions that have been included in all the current drafts of health reform bills in the House and Senate.

“Free rider” provisions, which would require companies to reimburse the government for health care costs incurred by workers using federally funded health programs, have also been watered down to exclude companies that offer coverage to workers, such as Wal-Mart.

Wal-Mart has also been granted access to power. In late July, Duke joined a few other CEOs in a meeting with Obama to discuss health care reform. Wal-Mart executives also joined other members of the Better Health Care Together coalition in a recent meeting with Health and Human Services Secretary Kathleen Sebelius to discuss health reform.

“At the very least what they’ve gotten is much closer access to the administration than they would have gotten before,” the Sunlight Foundation’s Allison says.