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It has been widely reported that at a health care conference this week in Washington, DC, Starbucks chairman Howard Schultz said that the $200 million that his company will spend this year for health care for its 80,000 U.S. employees is actually more than what the company spends on green coffee from Africa, Indonesia and other countries. It is, he said, “completely non-sustainable.”

Now, Starbucks is in this situation partly of its own choosing – it offers health care coverage to any employee who works a minimum of 20 hours a week, and it increasingly has been hiring older employees who find its benefits package appealing. At the same time, there is an upside to this approach – these same employees who are costing the company so much money in health care also tend to be long-term employees, which means that the company is able to save money on such items as training while getting higher levels of productivity from these workers.

But Schultz – who was joined at the conference by executives that included Costco CEO Jim Sinegal and president/CEO Dawn Lepore – said that the US Congress needed to put the nation’s health care crisis “at the front of their agenda,” finding a way to keep health care costs in check while assuring that “every single American (has) access to health insurance.”

The Associated Press reports, by the way, that health insurance premiums rose 9.2 percent between spring 2004 and 2005 – the first time since 2000 that the increase hasn’t been in double digits, but a rate still way in excess of the 2.7 percent wage increase that the average American received during that same period of time.
KC's View:
It is ironic – and our sense of the folks at Starbucks is that they are a group of people with a healthy sense of irony and perspective – that a retailer that is perceived as being generous and democratic (small “d”) in its benefits program is in essence making the same argument as Wal-Mart, which is perceived as being far less benevolent in this area. It is an argument that nobody dispute – that health care in this country is far too expensive and that something has to be done about it.

Some will say, we suspect, that one way Starbucks could cut back on benefits costs is to cut back on benefits. But that’s sort of a specious argument, because it doesn’t deal with the problem. And Starbucks is intelligent enough to know that its benefits are part of its culture, and that these benefits allow it to recruit and keep employees that offer it all sorts of other advantages.

We’re not smart enough to know what the best solution is. But we are smart enough to know that there has to be a solution, and that industry and government have to come together to figure out a way to provide exceptional health care to every American without bankrupting companies or the country. Wal-Mart CEO Lee Scott has suggested some sort of nationalized health care program, though there are plenty of people who disagree with him. But we’re curious what would happen if you put Scott, Schultz and other American business and political leaders in a room and told them they couldn’t leave until they figured out a cost-effective way to make sure that every American had the same sort of health care coverage as, say, the members of the US Congress?