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Why, Wal-Mart?

The retail giant's drive to recover money from an injured employee may be legal, but it's not right.

November 21, 2007

Deborah Shank's story would have been sad enough, considering the devastating injuries she suffered in a traffic accident seven years ago. Nevertheless, Wal-Mart found a way to add a brutal coda.

As chronicled in Tuesday's Wall Street Journal, Shank, a former overnight shelf-stocker for Wal-Mart in southeastern Missouri, was driving her minivan when she was broadsided by a semi and suffered permanent brain damage. Unable to walk without help, she lost the ability to care for herself or interact meaningfully with her family. Now 52, she lives in a nursing home.

Wal-Mart started out as one of the good guys in this story, paying almost $470,000 of her initial medical bills. But three years after Shank's husband sued and settled with the semi driver's employer, the retail giant changed hats. It demanded every penny back, plus interest and legal fees -- more, in fact, than the $417,477 the settlement had placed in a special-needs Medicaid trust fund for Shank's future healthcare expenses.

The company persuaded a federal district court judge and the U.S. 8th Circuit Court of Appeals to award it the full amount, even though Shank's family had paid for the lawsuit. Nor did it matter that the settlement covered a fraction of her expenses and losses. Wal-Mart's healthcare plan clearly states that it gets first dibs on any money recovered by injured employees. Such provisions aren't uncommon in health plans, and Wal-Mart isn't the first to enforce one.

Doing what the law allows isn't the same as doing the right thing, however. The company made itself whole at the expense of a helpless former employee who will never be whole again. Instead of having some resources to improve her care, Shank will receive only the basic services afforded her by Medicaid and Social Security. Nor will the trust fund be in a position to reimburse Medicaid (i.e., taxpayers), which stood to collect any unspent money upon Shank's death.

Wal-Mart argues that it's just trying to be fair to those still paying into the company's healthcare plan. Big payouts to insured workers can drive up the plan's premiums. The half-million dollars it spent on Shank's care, however, translates into less than 40 cents per Wal-Mart employee. In its most recent quarter, its stores generated that much in operating income every eight minutes.

Wal-Mart has spent the last few years working hard to rebut healthcare reformers, labor unions, anti-globalization groups and other critics who've argued that it puts profits ahead of humanity. While its advertising campaigns try to put a friendlier spin on the company, its behavior toward Shank tells a different story. If Wal-Mart can't restrain itself, perhaps Congress should prevent health plans from draining settlements won by injured workers with more bills to pay.

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