When economists hear of a \”shortage,\” they immediately ask whether a price mechanism is being allowed to adjust in a way that would bring quantity demanded and quantity supplied into balance. Thus, when economists hear that there is a shortage of kidneys for purposes of transplantation, they wonder about whether a price mechanism–that is, paying kidney donors–could save lives and money. A group of doctors takes on this question in \”A Cost-Benefit Analysis of Government Compensation of Kidney Donors,\” by P. J. Held, F. McCormick, A. Ojo and J. P. Roberts, which is now available as an online pre-publication version at the American Journal of Transplantation.
One concern about paying for kidney donations is that it would be a mechanism in which rich people could exploit the short-term financial needs of poor people. With this concern in mind, the authors suggest that instead of anything looking like a \”market\” in buying and selling kidneys, the government should just pay kidney donors directly. Here\’s how they describe it:
This paper … provides a comprehensive cost-benefit analysis of … moving from our current kidney procurement system in which compensation of donors is legally prohibited to one in which the government (not private individuals) compensates living kidney donors $45 000, and deceased donors $10 000. Such compensation would be considered an expression of appreciation by society for someone who has given the gift of life to another. It could include an insurance policy against any health problems that might develop in the future as a result of the donation, including disability and death. Compensation for living donors could be paid in a delayed form, such as tax credits or health insurance, so people who are desperate for cash would not be tempted to sell a kidney. Compensation for deceased donors would be paid to their estate. All other aspects of the kidney procurement and allocation process would continue exactly as they are under the current system. In particular, living donors would continue to be carefully screened and informed of possible hazards associated with kidney donation. Kidneys would be allocated as the organs from deceased donors are now—by the federally funded and managed Organ Procurement and Transplant Network (currently administered under contract by United Network for Organ Sharing).
In this proposal, all kidney donors would be paid in a transparent and up-front manner, and those with high incomes would have no greater ability to jump the queue for a kidney transplant. Indeed, if enough kidneys were donated so that there was no shortage, pressures for black-market kidney purchases would be greatly diminished. What might such a plan accomplish? Held, McCormick, Ojo and Roberts summarize their estimates of costs and benefits in this way:
From 5000 to 10 000 kidney patients die prematurely in the United States each year, and about 100 000 more suffer the debilitating effects of dialysis, because of a shortage of transplant kidneys. To reduce this shortage, many advocate having the government compensate kidney donors. This paper presents a comprehensive cost-benefit analysis of such a change. It considers not only the substantial savings to society because kidney recipients would no longer need expensive dialysis treatments—$1.45 million per kidney recipient—but also estimates the monetary value of the longer and healthier lives that kidney recipients enjoy—about $1.3 million per recipient. These numbers dwarf the proposed $45 000-per-kidney compensation that might be needed to end the kidney shortage and eliminate the kidney transplant waiting list. From the viewpoint of society, the net benefit from saving thousands of lives each year and reducing the suffering of 100 000 more receiving dialysis would be about $46 billion per year, with the benefits exceeding the costs by a factor of 3. In addition, it would save taxpayers about $12 billion each year.
The paper (with its on-line appendices) walks through the basis for these estimates in a step-by-step manner. I\’m no expert in these numbers, but from what I\’ve seen, their estimates are all well within the range of plausibility. Let me just emphasize a few points that come up in their discussion:
One advantage of having a greater number of kidneys is that organ recipients wouldn\’t have to wait five years for a kidney. They would be younger and healthier when receiving a kidney, in part because they wouldn\’t have been going through dialysis for years. Thus, the beneficial health effects of receiving a kidney transplant would be on average higher with a greater number of donated kidneys.
Government currently ends up paying for a lot of health care costs related to kidney disease through Medicare and Medicaid. In particular, people with kidney failure are eligible for Medicare to pay for their kidney dialysis even if they have not reached age 65. Because kidney transplants eliminate the need for dialysis–and also reduce the need for other health care services–taxpayers would come out ahead with a government kidney-buying program. In other words, even leaving aside the nonmonetary benefits of longer life expectancy and better health for kidney donor recipients, this proposal would be a money-saver for government.
The concern that paying for kidneys would exploit the poor as a group is overstated, or even backwards. Held, McCormick, Ojo and Roberts put the case this way:
[T]he present system, in which compensation of kidney donors is legally prohibited, has resulted in a huge shortage of transplant kidneys that seriously harms all transplant candidates—especially the poor, and especially poor African Americans, because they are considerably overrepresented on the kidney waiting list due to the generally worse state of their health. In contrast, if the government compensated kidney donors, it would greatly increase the availability of transplant kidneys, making all transplant candidates, especially the poor, much better off. Indeed, the poor would enjoy the greatest net benefit because they would gain the $1.3 million value of a longer and healthier life, but almost all of the costs of transplantation for the poor person would be borne by the taxpayer through Medicare and Medicaid. So the current prohibition on compensating kidney donors, which is supposedly intended to keep the poor from being exploited, is in fact seriously harming them. And having the government compensate kidney donors would be an enormous boon for the poor.
Want more discussion of kidney and organ transplants? Along with the paper, one starting point is my post \”Selling a Kidney: Would the Option Necessarily be Beneficial?\” (March 12, 2014). Also, the Journal of Economic Perspectives published a \”Symposium on Organ Transplants\” back in the Summer 2007 issue with two Nobel laureates among the authors. (Full disclosure, I\’ve been the Managing Editor of JEP since 1987.) The articles are:
- \”Introducing Incentives in the Market for Live and Cadaveric Organ Donations\” (pp. 3-24), by Gary S. Becker and Julio Jorge Elías Full-text Article
- \”Producing Organ Donors\” (pp. 25-36), by David H. Howard Full-text Article
- \”Repugnance as a Constraint on Markets\” (pp. 37-58), by Alvin E. Roth | Full-text Article
Interested in other cases where the question arises of whether to pay those who donate something from their body for medical purposes? In earlier posts, I\’ve offered some discussion of the US system of \”Volunteers for Blood: Paying for Plasma\” (May 16, 2014), and of \”The Human Breast Milk Market\” (August 24, 2015)