The Fiscal Consequences of Banning Compensation for Organ Donors

By Caleb Petitt of The Independent Institute.

"Could lifting restrictions on organ sales help ease the burden of America’s current fiscal crisis? Surprisingly, allowing kidney donors to get paid for their donation, even through the form of tax benefits, could have a significant impact on federal spending. The federal government pays a significant share of the costs involved in providing dialysis, and nearly half of all patients on dialysis use Medicare.

In 2019, nearly 395,000 Medicare beneficiaries were dialysis recipients who had their treatment covered by fee-for-service (FFS) plans. The average cost per patient for Medicare/Medicaid FFS patients with end-stage renal disease was $98,985 annually. That means that American taxpayers spent about $39 billion on dialysis alone in 2019, making up 4.9 percent of Medicare’s expenditures and roughly 0.9 percent of total federal expenditures in 2019. Dialysis has not been cheap for the American taxpayer.

The only way to get someone off of dialysis is for them to get a kidney transplant. Chronic Kidney Disease (CKD) patients with a successfully transplanted kidney can stop dialysis and begin living a normal life.

Kidneys, however, are in very short supply. There were nearly 90,000 people on the organ transplant waiting list for a kidney as of September 2024, but just over 27,000 kidney transplants were performed in 2023. The average wait time for a kidney transplant is between three to five years. That means nine to 15 hours a week of being reliant on a machine for three to five years for each person on the waitlist, and the average cost to the federal government of $296,955 to $494,925 per patient. Our current system of getting kidneys for people who need them is incredibly costly for patients and taxpayers.

Increasing living kidney donors would help CKD patients and taxpayers. If a patient finds a willing living donor, they can get a transplant within 6 months, assuming the donor’s evaluation shows they can safely donate. Living kidney donations are also more effective at helping the patient, since doctors can run more tests and screen for more potential problems with a living donor compared to a deceased donor.

But finding living donors is very difficult. Of the 27,500 kidney transplants that were performed last year, fewer than 6,500 were from living donors. Of living kidney donors, about 96 percent of the donations are directed to a specified friend or family member. Since family and close friends of someone who needs a kidney are often already willing to see if they are a viable donor, the way to increase living kidney donations is to increase donations from strangers.

Many economists have proposed a free market for organs to increase their availability, but such proposals are frequently dismissed as being radical, unrealistic, or unethical. Fortunately, such a dramatic step is not the only way to improve our current system.

In 2024, the bipartisan End Kidney Deaths Act was introduced to Congress, and the bill was reintroduced this year. If passed, it would grant a fully refundable $50,000 tax credit to undirected living kidney donors (meaning that the recipient is not specified) in 5 annual $10,000 increments, which could go a long way in encouraging living kidney donations. As long as the average wait time for a kidney fell by just six months, the program would pay for itself.

Medicare and Medicaid made up 20 percent of federal expenditures last year, and it is nearly impossible to cut funding for those programs. If the federal government is trying to improve its fiscal health, and it desperately needs to, it needs to look for ways to make those programs run more efficiently. Allowing for financial compensation for living organ donations, especially kidneys, would improve the lives of people on dialysis and improve America’s fiscal health."

UNOS Kills

From Alex Tabarrok.

"I’ve long been an advocate of increasing the use of incentives in organ procurement for transplant; either with financial incentives or with rules such as no-give, no-take which prioritize former potential organ donors on the organ recipient list. What I and many reformers failed to realize, however, is that the current monopolized system is so corrupt, poorly run and wasteful that thousands of lives could be saved even without incentive reform. (To be clear, these issues are related since an incentivized system would never have become so monopolized and corrupt in the first place but that is a meta-issue for another day.) Here, for example, is one incredible fact:

 An astounding one out of every four kidneys that’s recovered from a generous American organ donor is thrown in the trash.

Here’s another:

Organs are literally lost and damaged in transit every single week. The OPTN contractor is 15 times more likely to lose or damage an organ in transit than an airline is a suitcase.

Organs are not GPS-tracked!

In an era when consumers can precisely monitor a FedEx package or a DoorDash dinner delivery, there are no requirements to track shipments of organs in real time — or to assess how many may be damaged or lost in transit.

“If Amazon can figure out when your paper towels and your dog food is going to arrive within 20 to 30 minutes, it certainly should be reasonable that we ought to track lifesaving organs, which are in chronic shortage,” Axelrod said.

Here’s one more astounding statistics:

Seventeen percent of kidneys are offered to at least one deceased person before they are transplanted….

Did you get that? The tracking system for patients is so dysfunctional that 17% of kidneys are offered to patients who are already dead–thus creating delays and missed opportunities.

All of this was especially brought to light by Organize, a non-profit patient advocacy group who under an innovative program embedded with the HHS and working with HHS staff produced hard data.

Many more details are provided in this excellent interview with Greg Segal and Jennifer Erickson, two of the involved principals, in the IFPs vital Substack Statecraft."

Presumed Consent in Wales Falls Short (for organ donors)

By Alex Tabarrok.

"In 2003, Johnson and Goldstein published what would become a famous paper in Science, Do Defaults Save Lives? The paper featured a graph which showed organ donor consent rates in opt-in countries versus those in opt-out countries. The graph is striking because it seems to suggest that a simple change in the default rule can create a massive change in organ donor


rates and thus save thousands of lives.

The graph, however, does NOT show organ donor rates. It shows that in opt-in countries few people explicitly opt-in and in presumed consent countries few people explicitly opt-out. But when a potential organ donor dies the families of people in opt-in countries who did not opt-in are still asked whether they would like to donate their loved one’s organs and many of them say yes. Similarly, in the presumed consent countries the families of people who did not opt-out are still typically asked whether they would like to donate their loved one’s organs and some of them say no.

The actual difference in organ donation rates between opt-in and presumed consent countries is much smaller than the differences in the graph, as Johnson and Goldstein made clear later in their paper. Nevertheless, the simple story in the graph encouraged many people to put excess weight on presumed consent as the solution to low organ donor rates.

The best estimates of presumed consent suggested that switching to presumed consent might increase organ donor rates by 25%. 25% isn’t bad! But we don’t have many examples of countries that have switched from one system to another so that estimate should be taken with a grain of salt.
The latest evidence comes form Wales which switched to presumed-consent in 2013. Unfortunately, there has been no increase in donation rates.

The most significant analysis of the new system is the Impact Evaluation Report, released by the Welsh Government in November 2017. Whilst focusing on the positives, such as increased understanding among medical staff, the report cannot escape the donation statistics, which clearly show no improvement. Covering the period from January 2010 or January 2011 to September 2017, all donation data show no change since the legislation’s introduction. The 21-month period before the Act came into effect saw 101 deceased donors, whereas the same period after showed 104; an increase, but one that can be properly attributed to expected annual fluctuation.

I still favor presumed consent or better, mandated choice, but I don’t think the binding constraints on organ donation are default rules. More important are preferences and fears about donation, the existence of a professional system using people who are trained to ask for donations, an institutional organization that can use donations when they are available (minimizing waste), and, of course, incentives."

New Zealand to Compensate Organ Donors

From Marginal Revolution.

"New Zealand will now compensate live organ donors for all lost income:

Today’s unanimous cross-party support for the Compensation for Live Organ Donors Bill represents a critical step in reducing the burgeoning waiting list for kidney donations, according to Kidney Health New Zealand chief executive Max Reid.
“The Bill effectively removes what is known to be one of the single greatest barriers to live organ donation in NZ,” Mr Reid says. “Until now the level of financial assistance (based on the sickness benefit) has been insufficient to cover even an average mortgage repayment, and the process required to access that support both cumbersome and demeaning. The two major changes that this legislation introduces – increasing compensation to 100% of lost income, and transferring responsibility for the management of that financial assistance being moved from WINZ to the Ministry of Health – will unquestionably remove two major disincentives that exist within the current regime.”

Eric Crampton (former GMU student, now NZ economist who supported the bill) notes that a key move in generating political support was that New Zealand MP Chris Bishop framed the bill as compensating donors for lost wages rather than paying them. A decrease in the disincentive to donate–an increase in the incentive to donate. To an economist, potato, potato. But for people whose kidneys fail in New Zealand, the right framing may have been the difference between life and death.
This is also a good time to remind readers of Held, McCormick, Ojo and Roberts, A Cost-Benefit Analysis of Government Compensation of Kidney Donors published in the American Journal of Transplantation.

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 moral case for paying kidney donors

By Scott Sumner.

"A recent study in the American Journal of Transplantation just reached what to many people may be a shocking conclusion: Taxpayers would be able to save thousands of lives and about $12 billion per year if the government started compensating people for kidney donations. According to the study, “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.” For economists who have long advocated for the creation of a market of organ transplants, this news is not surprising.

Shortages occur when regulations hold prices below equilibrium — that is, where the demand of a product and supply of a product meet. Often the result is simply inconvenience, as with the shortage of apartments in New York or the long gas lines in the 1970s.

But in terms of kidneys for transplantation, regulations lead to more than an inconvenience. The prohibition of payment to organ donors has led to a kidney shortage leading to the preventable loss of 5,000 to 10,000 lives each year. The cost of treating people with kidney disease is so high that an organ transplant market would not merely save lives, but would actually save money as well.

According to the study, “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.” Given this “win-win” situation, why hasn’t an organ market been created?

The main reason is that many people find the idea to be morally repugnant. Yet the two most common arguments against paying people for organ donations are both flawed.

One concern is that an organ market would exploit those with fewer resources. The impoverished or low-income would be more likely to donate organs for money, as $45,000 means much more to a poor person than a rich one. However, this exploitation argument seems at odds with the moral calculus we use to justify most of our lives. Our entire economic system is based on rewards for doing things, and it’s always true that those rewards will mean more (per dollar) to a poor person than a rich one. Working in a coal mine is certainly more unpleasant and dangerous than working in an office. Does this mean that coal miners are exploited? And recall that people both rich and poor donate even without compensation. If paying for kidney donation is unfair because it would appeal more to the poor, then much of the economy we rely on daily would have to be rejected on similar grounds.

In a market economy, we tend to assume that people who voluntarily enter into an exchange will benefit from that transaction. There may be exceptions (say, a heroin addiction). But as far as I can see, organ donation should be more like the decision to work in a coal mine — a rational decision to improve one’s economic situation at a modest but acceptable health risk.

Many other objectors have the moral intuition that there is something unethical about turning the human body into a commodity. Economists have a hard time countering this argument, as our moral framework tends to be somewhat blind to non-utilitarian considerations. But can we always trust our moral intuitions? 

During the Middle Ages, lending money at interest was viewed as immoral. Just a few hundred years ago, life insurance was viewed as repulsive — like wagering on the death of one’s spouse. I’m old enough to recall when homosexuality was widely viewed as unnatural, and the notion of gay marriage went against the moral intuitions of even a fair number of politically liberal people. 

Obviously, I can’t prove that our current queasiness about organ markets will someday seem as quaint as the earlier squeamishness about life insurance. But I’d ask people to consider the precautionary principle, our usual propensity to avoid enacting public policies known to cost thousands of lives with very uncertain benefits. We went into Iraq unsure of whether the move was justified, and lost about 5,000 troops. Here is a policy (prohibition on paying donors) that is estimated to cost that many lives every single year, if not more.

Before doubling down on a policy that we know will cost thousands of lives each year, don’t we need to be pretty sure that our moral intuitions on the issue are correct and not something that will later change, as they so often do? I don’t know about you, but when I think of all the actual suffering caused by this regulation, I find it hard to justify not giving individuals a choice."

A Cost-Benefit Analysis of Government Compensation of Kidney Donors

From Alex Tabarrok of Marginal Revolution.

"The latest issue of the American Journal of Transplantation has an excellent and comprehensive cost-benefit analysis of paying kidney donors by Held, McCormick, Ojo, and Roberts. Earlier, Becker and Elias estimated that a payment of $15,000 per living donor would be sufficient to eliminate the US waiting list. The authors adopt a larger figure of $45,000 for living donors and $10,000 for deceased donors and find that even at these rates paying donors generates benefits far in excess of costs.

In particular, a program of government compensation of kidney donors would provide the following benefits (quoting from the article):

• Transplant kidneys would be readily available to all patients who had a medical need for them, which would prevent 5000 to 10 000 premature deaths each year and significantly reduce the suffering of 100 000 more receiving dialysis.

• This would be particularly beneficial to patients who are poor and African American because they are considerably overrepresented on the transplant waiting list. Indeed, it would be a boon to poor kidney recipients because it would enable them to reap the great benefits of transplantation at very little expense to themselves.

• Because transplant candidates would no longer have to spend almost 5 years receiving dialysis while waiting for a transplant kidney, they would be younger and healthier when they receive their transplant, increasing the chances of a successful transplantation.

• With a large number of transplant kidneys available, it would be much easier to ensure the medical compatibility of donors and recipients, which would increase the success rate of transplantation.

• Taxpayers would save about $12 billion each year. Dialysis is not only an inferior therapy for end-stage renal disease (ESRD), it is also almost 4 times as expensive per quality-adjusted life-year (QALY) gained as a transplant."

In 2004 there were fewer than 4 kidney patients on the waiting list for every kidney transplant operation (3.77 to 1) while in 2014 there are nearly 6 patients for every operation (5.96 to 1)

From Mark Perry. 

"At the end of last year there were almost 102,000 patients on the kidney waiting list, a number that far exceeded the number of kidney transplant operations in 2014, slightly more than 17,000. Here’s one way to understand how desperate the situation is for kidney patients: in the last decade, the kidney waiting list has grown by 41,510 (from 60,400 to 101,910) while the number of kidney transplant operations has only grown by 1,100 (from 16,006 to 17,106). Or we can say that in 2004 there were fewer than 4 kidney patients on the waiting list for every kidney transplant operation (3.77 to 1) while in 2014 there are nearly 6 patients for every operation (5.96 to 1)."

An organ shortage kills 30 Americans every day. Is it time to pay donors?

From Keith Humphreys of the Washington Post. Keith Humphreys is a Professor of Psychiatry and Mental Health Policy Director at Stanford University.Excerpts:

"

Source: U.S. Health Resources and Services Administration

"Taxpayers also bear a significant burden in the case of kidneys because of the special status of renal dialysis within the Medicare program. In 1972, Congress mandated that Medicare cover the costs of care for end stage renal disease regardless of patient age. In 2011, over 500,000 people took advantage of this benefit at a cost of over $34 billion, which is more than 6% of Medicare’s entire budget.

"Tom Mone, chief executive of OneLegacy, the nation’s largest organ and tissue recovery organization, points out that “The recovery rate for deceased donors in the United States is actually better than that of European nations with presumed consent laws. The United States rigorously follows individual donor registrations whereas presumed consent countries actually defer to family objections.”"

"less than 1% of deceased individuals are medically eligible to donate organs, and 75% of this group in the United States in fact does so, there simply isn’t enough “there there” to remedy the shortage with improved recovery from deceased donors."

"Sally Satel (a resident scholar at the American Enterprise Institute):

Here is one model: a governmental entity, or a designated charity, would offer in-kind rewards, like a contribution to the donor’s retirement fund, an income tax credit or a tuition voucher, or a gift to a charity designated by the donor. Because a third party provides the reward, all patients, not just the financially secure, will benefit."

Meanwhile, imposing a waiting period of at least six months would ensure that donors didn’t act impulsively and that they were giving fully informed consent. Prospective compensated donors would be carefully screened for physical and emotional health, as is done for all donors now."

"all rewarded donors would be guaranteed follow-up medical care for any complications, which is not ensured now."

"KH: Some remarkable people altruistically donate kidneys to complete strangers. If the U.S. adopted a paid donor model, might such individuals stop donating, thereby making the shortage worse?

SS:Altruism – the “gift of life” narrative – is a beautiful virtue but, clearly, is not enough. Yet, for decades, the transplant establishment has embraced altruism as the only legitimate basis for giving an organ. If we keep thinking of organs solely as gifts, there will never be enough of them. Deaths will mount,"

"“crowding out” is unlikely. We have no shortages of blood plasma, eggs, sperm, and cadavers for medical school dissection. Why? Because donors are remunerated. Also, data suggest that voluntary activities in such contexts are not suppressed as long as the meaning is preserved'

 "I’ve also heard critics allege that increasing organ donation through donor benefits “cheapens the gift.” It is unlikely that the recipient of a lifesaving kidney would agree."

"the number of kidney transplants performed over the past several years has been basically flat."

"KH: How big an impact could your proposal make? Would we clear the waiting list or just shorten it?

SS: There is every reason to expect that it would. After all, persuasive data show that paying for blood leads to greater donation. The U.S. is the one of the very few countries that pays donors for their blood plasma and is, in fact, the supplier for the rest of the world."

"Did we honor the heroism of 9/11 firefighters who rushed into the World Trade Center towers any less because they got paid?"
"Some worry that that rewarded donation will attract only low-income people. This is possible, though only a trial project can provide the answer. But even if this turns out to be the case, why doubt the capacity of low income people to make decisions in their own interest"

Cash for kidneys will solve the organ shortage, save money spent on dialysis, and then we’ll wonder why it took so long

Great post by Mark Perry of "Carpe Diem."  Here is a link to the WSJ article.

It also said "n 2012, almost 4,500 persons died while waiting for kidney transplants" and "In 2012, 95,000 American men, women and children were on the waiting list for new kidneys, the most commonly transplanted organ. Yet only about 16,500 kidney transplant operations were performed that year" kidney exchanges account for only 3% of all donations. And the average annual cost of dialysis is $80,000.

"

Economists Gary Becker and Julio Elias make the case in today’s WSJ that a market for organs and donor compensation of about $15,000 would eliminate the growing kidney shortage.  As the chart above shows, the kidney waiting list has nearly doubled from 50,000 in 2001 to almost 99,000 today, while the number of annual kidney transplant operations has increased only slightly from 14,279 in 2001 to fewer than 17,000 in 2013. Over the last eight years, kidney transplants have remained stuck at slightly below 17,000 per year, while the kidney waiting list has swelled by almost 30,000.  Therefore, there an additional 30,000 patients today (99,000) than in 2006 (69,600) competing for the same number of transplants. And that’s why, as Becker and Elias point out, the average waiting time for a kidney has increased to 4.5 years from 2.9 years a decade ago. The authors argue that “Paying donors for their organs would finally eliminate the supply-demand gap.”

Isn’t donor compensation immoral? No, according to Becker and Elias (emphasis added:

The idea of paying organ donors has met with strong opposition from some (but not all) transplant surgeons and other doctors, as well as various academics, political leaders and others. Critics have claimed that paying for organs would be ineffective, that payment would be immoral because it involves the sale of body parts and that the main donors would be the desperate poor, who could come to regret their decision. In short, critics believe that monetary payments for organs would be repugnant.

Whether paying donors is immoral because it involves the sale of organs is a much more subjective matter, but we question this assertion, given the very serious problems with the present system. Any claim about the supposed immorality of organ sales should be weighed against the morality of preventing thousands of deaths each year and improving the quality of life of those waiting for organs. How can paying for organs to increase their supply be more immoral than the injustice of the present system?

Wouldn’t donor compensation exploit the poor? No, according to the authors:

 Though the poor would be more likely to sell their kidneys and other organs, they also suffer more than others from the current scarcity. Today, the rich often don’t wait as long as others for organs since some of them go to countries such as India, where they can arrange for transplants in the underground medical sector, and others (such as the late Steve Jobs) manage to jump the queue by having residence in several states or other means. The sale of organs would make them more available to the poor, and Medicaid could help pay for the added cost of transplant surgery.

How would donor compensation affect altruism (the current system that bans donor compensation and forces the price of a kidney to be $0.00, and actually negative when considering the donor’s time off work, etc.)?:

The altruistic giving of organs might decline with an open market, since the incentive to give organs to a relative, friend or anyone else would be weaker when organs are readily available to buy. On the other hand, the altruistic giving of money to those in need of organs could increase to help them pay for the cost of organ transplants.

How would donor compensation affect the price of kidney transplant operations and the cost of dialysis?

Paying for organs would lead to more transplants—and thereby, perhaps, to a large increase in the overall medical costs of transplantation. But it would save the cost of dialysis for people waiting for kidney transplants and other costs to individuals waiting for other organs. More important, it would prevent thousands of deaths and improve the quality of life among those who now must wait years before getting the organs they need.

What’s the bottom line (emphasis added)?

Initially, a market in the purchase and sale of organs would seem strange, and many might continue to consider that market “repugnant.” Over time, however, the sale of organs would grow to be accepted, just as the voluntary military now has widespread support.
Eventually, the advantages of allowing payment for organs would become obvious. At that point, people will wonder why it took so long to adopt such an obvious and sensible solution to the shortage of organs for transplant.

In 2008, nearly 5,000 people died waiting for a kidney

See Why Legalizing Organ Sales Would Help to Save Lives, End Violence by Anthony Gregory, a research editor at the Independent Institute. From the Atlantic Monthly.

"In the United States, where the 1984 National Organ Transplantation Act prohibits compensation for organ donating, there are only about 20,000 kidneys every year for the approximately 80,000 patients on the waiting list. In 2008, nearly 5,000 died waiting.

A global perspective shows how big the problem is. "Millions of people suffer from kidney disease, but in 2007 there were just 64,606 kidney-transplant operations in the entire world," according to George Mason University professor and Independent Institute research director Alexander Tabarrok, writing in the Wall Street Journal.

Almost every other country has prohibitions like America's. In Iran, however, selling one's kidney for profit is legal. There are no patients anguishing on the waiting list. The Iranians have solved their kidney shortage by legalizing sales.

Many will protest that an organ market will lead to exploitation and unfair advantages for the rich and powerful. But these are the characteristics of the current illicit organ trade. Moreover, as with drug prohibition today and alcohol prohibition in the 1920s, pushing a market underground is the way to make it rife with violence and criminality.

In Japan, for the right price, you can buy livers and kidneys harvested from executed Chinese prisoners. Three years ago in India, police broke up an organ ring that had taken as many as 500 kidneys from poor laborers. The World Health Organization estimates that the black market accounts for 20 percent of kidney transplants worldwide. Everywhere from Latin America to the former Soviet Republics, from the Philippines to South Africa, a huge network has emerged typified by threats, coercion, intimidation, extortion, and shoddy surgeries."

"Several years ago, transplant surgeon Nadley Hakim at St. Mary's Hospital in London pointed out that "this trade is going on anyway, why not have a controlled trade where if someone wants to donate a kidney for a particular price, that would be acceptable? If it is done safely, the donor will not suffer.""