The paper It All Depends: “Sticker Shock” in Health Insurance Reform, Pauly, Harrington and Leive, Wharton School, 01/04/2014 the conclusion is as follows:
Conclusion
"This analysis of the change in total expected payment for those to be covered in post-ACA exchanges tells rather different stories about "sticker shock." On the one hand, among those who previously bought individual coverage, premiums generally increase only modestly if they choose the plans with the lowest bronze or silver premiums. While bronze premiums are lower than what was paid before, however, estimated out of pocket payments are higher, so the net effect is a moderate increase in TEP. If people choose to pay the median silver premium, the increase will be larger, but (at 25-30%) is still much lower than some of the estimates from the informal literature.
The sticker shock story is much different for the previously uninsured. The low income previously uninsured will have subsidies to cover much of the higher premiums and cost sharing to which they will be subject. But the previously uninsured who will receive minimal subsidies, who constitute a sizeable fraction of the uninsured population, are estimated to experience a very large increase in financial responsibility. Not only will they have to pay significant premiums but, because of increases in total utilization because of moral hazard or greater willingness of providers to supply care, their responsibility for out of pocket payment will also increase. They will pay a slightly smaller fraction of their total cost of care than when they were uninsured, but the total cost will increase to such an extent that the financial burden will rise.
We have not provided welfare calculations for this population. Such calculations would reduce the change in TEP by an estimate of the value to them of additional care (but by something less than the cost of that care), and by a small reduction in the risk of very high levels of OOP. One reason for this large increase in TEP is the small average OOP for the non-low-income uninsured in the CPS data, and this data may have underestimated the relatively rare event of a high out of pocket payment. Even so, it seems that this is the population that will be subject to the most severe financial shock from health reform."
Note: click the link below then once upon the page which the link leads you to, click the very first link in the column of links and it will take you to the un-gated pdf version of this paper.
https://www.google.com/?gws_rd=ssl#q=%22Sticker+Shock%22+in+Individual+Insurance+under+Health+Reform+mark+pauly
A worthy point within the paper is that the previously uninsured taking the largest total expected payment (TEP) increase:
"Given our assumptions, an insurance plan can be evaluated in terms of its "Total Expected Price" (TEP), defined by:
(1) TEP* = P* + OOP*
where P* is the average premium paid by persons in a given subgroup, OOP* is the average expected amount paid out of pocket, and TEP* is the sum of the "average person’s" premium and the average person’s expected value of out of pocket payments."
"The policy exemplar of an uninsured person is one who faces the risk of paying out of pocket for all of their medical care, which means either high financial risk (if care is used) or reduced access (if it is not). But the combination of charity and bad debt care, combined with the effects of incentives to seek out free care at emergency departments of hospitals, mean that the uninsured as a group do not either face or pay the full market price paid by insured patients. Somewhat surprisingly, this use of free or subsidized care even applies to the large minority of uninsured people who have incomes high enough that they could "afford" insurance (Bundorf and Pauly, 2006). So the relevant analysis of the financial consequences (though not the welfare consequences) from health reform that results in insurance purchase for this population compares their actual out of pocket payment when uninsured with the combination of premiums and out of pocket payments they will face under bronze and silver plans after reform."
Upon further review, will the uninsured remain uninsured because they already know how the system works i.e. "combination of charity and bad debt care, combined with the effects of incentives to seek out free care at emergency departments of hospitals". It would be a rational response to a price spike to avoid the price increase and remain at zero price. Further, not only do the uninsured understand how the system works, they may feel comfortable, in that, they have learned what to obtain health-care so why bother learning a new system (if it isn't broke, don't fix it).
When gasoline prices rise in the U.S. media sources depict the increased price as a “tax”. When gasoline prices decrease in the U.S. media sources depict the decreased price as a “tail wind”. The basic concept depicted is that as gasoline prices increase consumers have less to spend on other consumption items and as gasoline prices decrease consumers have more money to spend on other consumption items. A nice neat package of price sensitivity and allocation of resources…. or is it?
Obviously price is a signal. However, price is a relative signal. That is, consumer A might be very sensitive to certain price increases where as consumer B is not. Also, what is the exact price level that creates sensitivity? And what ever sensitivity exists, the result is somehow purely demand driven consumer consumption of goods and services?
If one assumes consumer A has a household budget then one would assume that consumer A makes an assumption regarding gasoline prices. Lets assume consumer A decides $3.00 per gallon of gasoline will be the average. Hence if gasoline goes to $4 per gallon then consumer A must reallocate the budget. One could say the price increase is a tax upon consumer A’s budget. However, if prices retreat to $3.50 per gallon from $4 per gallon has a “tail wind” been created -or- is the tax on consumer A’s budget merely been reduced but not eliminated. In this example a “tail wind” would only occur if gasoline prices fell below the $3 per gallon assumption in the original budget. However, media sources depict any decrease in gasoline prices as a “tail wind” when in fact it all depends on the base assumption of average gasoline prices used by all the James and Jane Goodfellow(s).
The reverse is true. If consumer B made a bold assumption of $5 per gallon for gasoline and prices only rose to $4, then a “tail wind” existed through out the price changes and a “tax” never occurred.
Moreover, if James and Jane Goodfellow set a price for gasoline within a budget, do swings in price change behavior significantly or do we have more of the-boy-who-cried-wolf phenomena? Tax or tail wind, do constant price swings cause the consumer to create a sinking fund of sorts to deal with the price swings? That is, does the consumer apply risk management to the tax and tail wind price swings and hence neutralize the tax and tail wind phenomena through risk management of gasoline prices?
Finally, the tax or tail wind mantra makes an explicit and implicit assumption: any price change only affects consumption of goods and services. What about savings and investment? What if gasoline price changes only affect savings and investment for certain consumers? Why is gasoline price changes only equated with demand side items?
The next time one hears media sources making sweeping statements regarding gasoline price changes and the supposed tax or tail wind, one needs to consider sweeping macro economic statements of such types need considered on more micro economic grounds.
John Stossel recently wrote an essay entitled The Stupidity of "Buy American". Link to the essay appears below:
http://townhall.com/columnists/johnstossel/2011/11/02/the_stupidity_of_buy_american/page/2
Stossel is correct in that the rational consumer buys the best value regardless of the nation of origin. Many times the rational consumer buys American as it represents the best value. However, “buy American” is basically presented as a particular duty of the rational consumer to act irrational by limiting choice. That the irrational behavior will somehow, someway create American jobs. As pointed out by Stossel, if rational behavior yields basket of goods Y at price P, irrational behavior yields basket of goods Y at P+1 or basket of goods Y-1 at price P. In both situations, P+1 or Y-1 represents a value forgone by the irrational path. Where does this forgone value go?
One must think about who hypes “buy American”. Answer: unions and industry trade groups that benefit. The union wants artificially high wages and the trade group is having trouble competing. The forgone value of the irrational consumer is then transferred as artificially high union wages and supporting the uncompetitive trade group.
Taking this one step further, unions and trade groups are acting rational by advertising for the consumer to be irrational. Ah, the evil of it all!
Let us say one decides to “buy American”. Is the item 100% American? Are the machines, technology, capital, etc. that produce the product 100% American? In the main the answer is no.
Therefore, one may be able to translate “buy American” as merely “buy union assembled“.
