HEALTH CARE:
Kidney Beancounters

By Richard A. Epstein

The economics of organ donations. By Richard A. Epstein.

When the Institute for Medicine speaks, the health-care policy world listens. For just this reason, the IOM's recent comprehensive report, “Organ Donation: Opportunities for Action,” is a dreadful disappointment. However influential, it is so narrow-minded and unimaginative that it should have been allowed to die inside the IOM. Instead, it reduces the chances of fundamental reform in a donation system that sees, on average, 18 people on the kidney transplant list die each day because they do not receive desperately needed organs.

During the past few years, to be sure, we have done fractionally better in procuring organs, especially kidneys, which amount to 70 percent of the organs on the list. But no amount of table thumping by physicians and bioethicists can overlook the brutal fact that the lists get longer by about 6,000 persons each year and that the benefit from the organs that are used decreases as recipients have to endure, on average, four years of dialysis, leaving them in a weakened condition when—if—the needed organ arrives. In response to this palpable tragedy, the IOM committee proposes, again, to rearrange the deck chairs by urging—without ever quite saying how—various groups to redouble their efforts to stimulate altruistic donations. But the numbers just do not work.

Organs come from either cadavers or live donors; today the former slightly outnumber the latter. There is little room for upward movement, however, without fundamental change. The welcome decline in traumatic deaths has cut back on the supply of cadaveric organs. Yet although many individuals will give to family members and some will donate even to strangers, the supply of live organ donors available at no cost will lag far behind the demand. Our chronic organ shortage arises for a most prosaic reason that the IOM ignores.

The Price Is Right

The major source of future improvement lies only in financial incentives; yet the IOM committee (which contains one lawyer but no economist) dismisses these incentives out of hand. As far as it is concerned, the present ban should continue to preclude “direct payments, coverage of funeral expenses, and charitable contributions.” Experimental programs should be written off because they could, we are told, “lead people to view organs as commodities and diminish donations from altruistic motives.”

On average, 18 people on the kidney transplant list die each day for want of desperately needed organs.

This odd manifesto does not offer any reason why a positive price would not increase the sources—thus increasing the supply—of organs, but seeks to avoid the implications of that basic proposition with shopworn objections. One reason we have no empirical evidence on the influence of price on donation levels is that the government—on the basis of  recommendations from groups such as the IOM—refuses to allow anyone to do the work that would allow for the orderly accumulation of such evidence. So we must resort to theory, which predicts that an increase in price will lead to an increase in supply, for organs as for any other good or service. Not everyone will jump from the rafters to donate—but in a nation of 300 million people, it should be possible to induce 70,000 healthy donors to part with a kidney.

Some argue, as a rejoinder, that the price mechanism will drive out the altruists. Thank heavens. All markets have a few people who are willing to supply goods at a low price, or indeed for no price at all. But no one says that the market for food or medical services is defective when these inframarginal suppliers receive something extra when prices rise. That increase in cash only counts as a transfer payment that neither adds to nor detracts from overall social welfare.

The key social changes come from the lives saved through the increase in supply. Only a bioethicist could prefer a world in which we have 1,000 altruists per annum and more than 6,500 excess deaths over a world in which we have no altruists and no excess deaths. In any event, the altruists don't disappear. They can give money to help the poor purchase organs—or the medical and surgical services needed to purchase an organ transplant.

The IOM report also demonstrates an utter lack of imagination as to how a sensible organ market could be organized if the present legal ban were to be lifted. An aboveboard, functional organ market should be a simple one. First, the price should be determined by supply and demand. The market will tend to encourage individual bids from those who can make the greatest use of organs.

Second, potential organ donors should be provided with a wide range of social services, which can be supported by some of the savings from ending the current, horrifically expensive dialysis program. (Private foundations can join in as well.) That outside system of support would thereby reduce the pressure on purchasers who are ill-equipped to provide such ser-vices. It will also eliminate much of the concern that a market in organs will necessarily prey on the most vulnerable members of the population.

One reason we have no data on the influence of price on donation levels is that the government refuses to allow anyone to do the work to accumulate such evidence.

Finally, there should be some obvious limitations on donors—a problem that has been faced with all live donations. The issue of backroom sales, moreover, is not serious because organ transplants can be performed only in highly sophisticated medical centers. The simplest rule in this context requires only that the medical center use the same standards of eligibility for its paid organ suppliers as it does for the present crop of uncompensated donors.

Not everyone will jump from the rafters to donate—but in a nation of 300 million people, it should be possible to induce 70,000 healthy donors to part with a kidney.

The key lesson in all this is that we should look with deep suspicion on any blanket objection to market incentives—especially from the high-minded moralists who have convinced themselves that their aesthetic sensibilities and instinctive revulsion should trump any humane effort to save lives.

Available from the Hoover Press is Free Markets under Siege: Cartels, Politics, and Social Welfare, by Richard A. Epstein. To order, call 800.935.2882 or visit www.hooverpress.org.

Richard Epstein is the Peter and Kirsten Bedford Senior Fellow at Hoover. He also holds an endowed professorship at the University of Chicago Law School, where he directs the Law and Economics Program. As of 2007, he is also a visiting professor at New York University Law School. His areas of expertise include constitutional law and property rights, among others. His just-released book is Supreme Neglect: How to Revive the Constitutional Protection for Private Property.