Amazon, ObamaCare … and the “power of free”

Everybody knows that Amazon’s free shipping program has been a resounding success.

So much so. that the company has announced that it will be moving the minimum qualifying order up from $25 to $35 … inducing shoppers to fill  their carts fuller or switch to the highly profitable Amazon Prime program.

The free shipping program’s success was highly predictable based an an apparently inadvertent “matched market test” that Amazon did.

 

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Early-on, Amazon launched  free shipping on $25 orders in the U.S. and sales skyrocketed.

In the UK, Amazon launched “nominal shipping” (think, 99 cents) for orders totaling the equivalent of $25.

Sales increased … but only by a fraction of the U.S. sales gain.

Proof-positive of the “power of free” … and evidence an equally important dynamic: there’s a big difference between “free” and “almost free” … when you slip a price on something – even a small one, people recoil.

Now, what’s the link to ObamaCare?

 

Though the Feds are steadfastly refusing to release official enrollment numbers,there are rampant reports that practically all of the leaked enrollment numbers are folks signing up for Medicaid not for insurance through the exchanges.

Technically speaking, the Medicaid sign-ups are linked to ObamaCare since the ACA raised the income-qualification for Medicaid,dramatically increasing the number of people of people qualifying.

So, why have Medicaid enrollments taken off, while exchange enrollments have languished?

First answer is that Medicaid is a states-run program that’s already up and running.  New applicants are just being added to an existing, road-tested operation.

In most states, ObamaCare exchanges are part of the Fed system and they are, well, not up and running.

But, for  most of the states that elected to run their own exchanges (think, Kentucky), the exchanges are up and running.

That puts a whole new paint job on the picture.

Why are Medicaid enrollments in those state dwarfing exchange enrollments?

Simple, Watson.

It’s the power of free.

For qualified low-income applicants – and, there are more of them now – Medicaid is a free-to-them program.

There’s no reason not to sign up … it’s an economically rational decision.

I just hope that the ObamaCare mavens took into account the power of free and budgeted accordingly.

I’m betting the under on that one.

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Free vs. “almost free”

On the exchanges, many policies are subsidized but few are free — since folks qualifying for free could just enroll in Medicaid.

Subsidized = “almost free”

Hmmm.

Wonder if there’s a difference between free and almost free?

Ask Amazon, and don’t be surprised by the results.

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One Response to “Amazon, ObamaCare … and the “power of free””

  1. Los Says:

    Demand Elasticity of Amazon > Demand Elasticity of Healthcare… Just sayin

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