Wal-Mart bought itself a passel of bad publicity recently when it tried to recover its medical costs for a former shelf stocker who suffered brain damage in a car crash and then received a $1 million settlement. "Greedy and heartless" was how many described the company's actions. Now, Wal-Mart has said it won't, after all, go after the reported $470,000. That must be a great relief for the family of former employee Deborah Shank, who will need special medical care for the rest of her life.
As for Wal-Mart, which has been trying to reform its reputation as a healthcare Scrooge by improving employee healthcare benefits, you've got to wonder what exactly the company was thinking when it inflicted this PR wound on itself. But setting that aside, consumers should be aware that this isn't just a meanie tactic that the company dreamed up on its own. Companies and health plans have been going after accident settlements for years, and they're getting more aggressive about it as healthcare costs rise. Instead of taking aim at Wal-Mart alone, critics should widen their scope—and eyeball their own healthcare plan documents in the process. Because chances are that what happened to this family could happen to any of us.
In case you missed it, here's a quick recap of the Wal-Mart case, according to reported accounts. Deborah Shank, 52, was out visiting yard sales one day with a friend when a truck smashed into her minivan, causing serious brain injuries that sent her to the intensive care unit for several weeks. After attorney fees and other legal expenses were deducted from the $1 million settlement from the trucking company, the remaining $417,000 was deposited into a trust to cover Deborah Shank's long-term medical needs. Wal-Mart said that it was entitled to the money, and the courts agreed. The U.S. Supreme Court declined to hear the case.
Wal-Mart was indeed on solid legal ground. Buried in the fine print of many health plan contracts is language that permits a health plan or self-insured company to reimburse itself if a pot of money becomes available because of an accident settlement. In theory, there's some (but only some) sense to that. Someone whose insurance covers $10,000 in medical bills and who later receives a $100,000 settlement for medical costs, lost income, and pain and suffering is otherwise getting his medical bills covered twice. How can that be fair?
But settlements are rarely that straightforward. Particularly in catastrophic cases like the Shank's, there's often not enough insurance money to cover what the patient will need for future medical care and such. The trucking company involved in the Shank accident reportedly carried only $1 million in liability insurance. In this story, Deborah Shank's lawyer said her lifetime financial requirements could easily top $2 million. You could argue that Shank needs that money a whole lot more than Wal-Mart does. In fact, some states have laws that prohibit health plans from collecting any of the settlement money until the victims get their full share. I haven't investigated these laws lately, but last I checked, about half the states had them on the books.
There's a larger issue that's worth thinking about as well. If a health plan or a company can take your settlement money to repay itself for what it spent on your care, then what exactly are you getting for that premium check that you write every month? You could make the argument that your healthcare coverage isn't really insurance but more like a loan that you may have to pay back.
What do you think?
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