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Commentary By Yevgeniy Feyman

Kidney Donors Are Heroes. Let's Reward Them.

There's been a lot of media focus recently on the difficult topic of organ donations – specifically, kidneys. The New York Times, last month, ran a lengthy profile of several organ traffickers and hosted a debate on the ethics of paying for kidneys. More recently, the Times' editorial board recommended some of the non-monetary solutions proposed by transplant surgeons and bioethicists, concluding that “[monetary benefits raise] the troubling issue of inducing people — most likely the poor — to sell their kidneys, which violates federal law.”

Is this really such a “troubling” issue? Will allowing markets in human organs lead the rich to take advantage of the poor?

Before getting to this important question, it makes sense to review the gravity of the problems facing our current voluntary organ donation system (I will focus primarily on kidneys because this represents the bulk of the organ donation waiting list).

According to data from the Department of Health and Human Services, there are 101,260 people currently waiting for a kidney transplant, up from 51,000 in 2002. More worrisome is the fact that a growing share of those on the waiting list have been waiting for 5 or more years – about 10 percent in 2002 versus 14 percent in 2014. And while the number of kidney transplants is up – from about 15,000 in 2002 to nearly 17,000 in 2013 (final numbers for 2014 aren't available yet), this has come thanks to an increase of “deceased donors,” as the number of living donors has actually fallen. Consequently, the number of people dying while waiting for a transplant has grown – from about 3,900 in 2002 to 4,500 in 2013.

Suffice to say, supply is pretty far from meeting demand.

This is largely the consequence of how we've designed our legal system. The National Organ Transplant Act of 1984 conceived of the altruistic donation system we have today. The sale of organs for transplantation was banned, and instead, the Organ Procurement and Transplantation Network (OPTN), a membership organization that matches donors to patients, was born.

It shouldn't come as any shock, of course, that we face a shortage of kidneys. The 1984 law banning organ sales functions as a price ceiling – similar to affordable housing laws – and creates a shortage in its wake, leading to what economists call a “deadweight loss.” Of course, people still donate kidneys, even though they don't receive monetary compensation, out of the goodness of their hearts or to save a relative.

Altruism and family bonds notwithstanding, however, the cost of donating a kidney can be significant. As professors Capron and Delmonico point out in the New York Times debate, typically, donors have to pay for evaluation and transportation, they may lose wages due to time off, and complications after the donation may not be covered by insurance.

But this all begs the question – why have we decided that the price system is not an appropriate way to allocate organ donations? Indeed, the idea of putting a price on human organs is not only repulsive to the American legal system, but under international law as well. The World Health Organization encourages countries to stymie organ trafficking domestically, and similarly, the Declaration of Istanbul further emphasizes the international community's opposition to the sale of human organs. Yet it's not immediately clear that this blanket, moral opposition, rests on firm ground.

Much of the concern around allowing the sale of human organs is focused on three main points – 1) the dignity of human life being violated by putting a price on it; 2) that the rich would buy up all available organs; and 3) the concern of exploitation of the poor who might be induced into selling kidneys out of economic necessity. Given where we stand on kidney donations, neither point is very convincing.

While protecting the sanctity and dignity of human life is a noble cause, just because we don't allow market pricing for human organs, doesn't mean we're not putting a price on human life. As any economist will tell you, the true cost of something isn't the price you pay, but what you forgo to buy it – the opportunity cost. Therefore, the cost of having a non-price allocation system for human organs is not zero – instead, the cost includes the lives lost, unnecessary dialysis, and lost productivity because people remain untreated on waiting lists. And some proposals for keeping a “non-price” system would still involve non-monetary benefits in lieu of cash payments – while it might appear to be more moral, non-monetary benefits implicitly involve pricing.

Ethicists' concerns about the rich outbidding the poor are a bit more relevant. As medical ethicist Katrina Bramstedt puts it:

“Even a regulated system of organ sales will not prevent the inevitable back-door organ auction. And as with any auction, at some point, emotion takes over and truly informed decision-making is impaired (for sellers and buyers). The goal, or in this case the organ, becomes the ultimate prize, and poor and middle-income patients will be priced-out of the market because of to wealthy bidders.”

The idea here is that the rich may be able to pay a higher price for kidneys, and thus will outbid the poor, meaning that the supply of kidneys goes only to the rich. Helping to ensure a more equitable distribution of kidneys is an important goal. But even here, market mechanisms are probably a better alternative to rationing.

For starters, most people have access to credit markets – it's unlikely that the typical middle-class person would be unable to purchase a kidney even if it means going into debt or selling off assets to do so. But it's important to remember that altruism doesn't disappear when markets are introduced, and brokers would still be needed (information asymmetries don't disappear, either). It's likely that hospitals and non-profit foundations (the National Kidney Foundation, for instance) – who could act as brokers – would be able to flex their monopolist (and monopsonist) muscles by overcharging the rich, and undercharging the poor.

Even the worst-case scenario, where the rich truly do bid up the price of kidneys making them unavailable for the poor, is probably preferable to the current situation. The large waiting list for kidneys would likely dissipate fairly quickly – over a few years – while the rich bid up the price and buy up kidneys. But when there's no one left to bid up the price (meaning that demand falls), the cost of kidneys will fall.

Concerns over exploitation of the poor are probably the most salient of all. While it's easy to say that someone who wants to sell their kidney should be able to, it's understandably repugnant to imagine that in the richest country in the world, someone may face such hardship that selling their kidney is the only way out.

Unfortunately, there is no easy answer to this. Indeed, even with organ sales currently illegal, the poor in third-world countries often do get exploited by brokers representing clients from rich countries. Perhaps the optimal solution, then, is to limit the damage by regulating the sale of organs, rather than making it outright illegal.

Such an approach has worked well in Iran, which implemented a compensated kidney transplant program with significant government oversight and protection, in 1988. While Iran's program isn't perfect, and an American program would likely look somewhat different (with a bigger role for brokers) likely with less government involvement, it is an example of a successful compensated kidney transplant program that has eliminated the kidney transplant waiting list while avoiding exploitation of the poor (about half of the recipients are poor, and only about 13 percent are rich). Rather than making kidneys “priceless,” we can take a page from Iran and figure out what a well-regulated “eBay for Kidneys” could look like.

There are many ways to regulate kidney sales while still allowing the price system to function. As a first step, it would be important to certify hospitals, clinics, and possibly non-profit foundations, who would be allowed to broker the sale of kidneys. A minimum level of testing would be required to ensure that the organs are in good shape, and that the people involved are healthy enough to go through the transplant operation. Disclosure of risks, costs, and the like would be paramount.

To allay some fears of ethicists, we could allocate some Medicare funding to subsidize those with few assets, low income, and with poor access to credit markets. Alternatively, Medicare could simply buy up a certain number – let's say 10 percent – of kidneys each year and allocate them to the poor.

If the concern is discomfort at the notion of selling body parts, we don't need to call it a “sale.” Instead, we're providing an honorarium (in Iran, the government funds a small honorarium while either buyers or charitable foundations put additional money on the table) those who choose to donate a kidney and save a life. Medicare could implement a prize system for kidney donations, and even come out ahead. For instance, CMS could pay kidney donors the difference between the net present value (NPV) of per-capita Medicare ESRD costs (which were around $75,000 per capita in 2010) and the NPV of taking care of a transplant patient (including, of course, the cost of the transplant itself). Assuming that a transplant costs $262,900 (including 180 days of immunosuppressive drugs), that the annual cost to Medicare of a functional transplant beneficiary is $13,749 and is borne beginning in the first year (when the transplant is performed), and a 5 percent discount rate over 10 years, the NPV of savings from the kidney transplant is about $223,000.

Unfortunately, preventing the exploitation of the poor for kidney sales isn't easy, and may actually make the poor worse off. For instance, people on the kidney transplant waiting list are disproportionately black and Hispanic (50.5 percent in 2012), whereas they make up 30 percent of the population and tend to have significantly lower incomes than whites. Those on the waiting list are, ostensibly, those who would benefit most from an increased supply of kidneys. Perhaps financial incentives would spur many poor people to donate kidneys – but these kidneys would have a good chance of going to other poor people. But even if there was a spurt of poor donors, it's tough (and takes a very paternalistic attitude) to argue that a person is worse off donating a kidney and receiving financial compensation, then not donating and not being compensated.

All these concerns aside, there's a much simpler argument in favor of allowing reimbursement for kidney donations – paying for kidneys would, on net, lead to fewer deaths on the waiting list. Certainly, not all 4,500 deaths would be avoided – some would face complications following the transplant, and others might simply be too sick to undergo the transplant to begin with. But given that many ethicists' concerns about costs are theoretical, philosophical, or “aesthetic” in nature – the potential for exploitation; the “immoral” appearance of paying for life – while the benefits would be clear and well-defined, we should default to the system that maximizes real benefits instead of one that minimizes hypothetical costs.

This piece originally appeared in Forbes

This piece originally appeared in Forbes