The Homa Files

In marketing, there’s a concept called a “perceptual difference”.

The basic notion is that something has to be sufficiently different from a comparative benchmark in order to make a difference in the way people think about it.

For example, throwing an extra 1/2 ounce of Cheerios into a 14 ounce box probably doesn’t pass the perceptual difference test. It adds to the cost of the product, but probably doesn’t motivate buyers to pay more for it.

Increasing the contents by, say 20%, probably does .  Folks are likely to notice.  Whether they’re willing to pay more for the super-size is another question …

Which brings us to Pres Obama’s push to win seniors over to his health care plan.

Keep in mind that roughly half ObamaCare’s comes from $500 billion in Medicare cuts – half from cutting waste & fraud (yeah, right) and half by eliminating Medicare Advantage – a step-up HMO version of Medicare.

$500 billion passes the perceptual difference test, and seniors are taking the cuts personally.

To partially offset the cuts, ObamaCare is “filling the doughnut hole” in Bush’s prescription drug plan – a program that supplemented Medicare to cover seniors’ prescriptions – but only up to a certain amount – and then kicked back in for extraordinary prescription drug users. The gap between “a certain amount” and “extraordinary – designed to suppress unnecessary prescriptions “at the margin” – is the “doughnut hole”.

To close the doughnut hole, Obama is sending each Medicare senior a check for $250 – the equivalent of 68 cents per day. Hardly a perceptual difference.

Does the administration really think that 68 cents a day will get old folks to think that $500 billion in cuts is good for them ?

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Side note: The notion of perceptual differences also provides an explanation for why Obama doesn’t get credit for his “tax cut to 95% of workers”.  His “making work pay” program paid out a max of $400 to workers – that’s a little over $1 per day.  A significant perceptual difference ?

Draw your own conclusion.

This entry was posted on June 10, 2010 at 6:55 am and is filed under Health Care / Medical Insurance, Mktg - Pricing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.