Compensating organ donors

It is illegal to pay organ donors for their gift. Economists can easily explain the consequences: at a price of zero, you have a big shortage. This is particularly the case for live donors, where donors face real personal costs, both in the transplant process and in recuperation.

Chris Bishop's bill, which passed Third Reading in the House yesterday, will compensate live organ donors at 100% of their lost income, and makes sure they're not left out of pocket for costs.

Here's Chris's speech at third reading.

Kidney transplants save the government over $120k in dialysis costs, net of the cost of the transplant and ongoing care.

For a long time, we were stuck in the worst of all worlds on this one. People don't like the idea of trade in organs and money being involved, and so governments made it illegal to pay anybody anything for an organ. Well, except for the surgeon, the nurse, the orderly, the person who mops the floor, the people running the kitchen at the hospital, the people making the equipment for the transplants - all of them, well, their choices are by definition uncorruptable and totally not based on coercive money being involved. Just the person who might donate an organ. That person had to be protected from coercive cash - and the consequence of a mandatory price of zero was a massive shortage in donor organs.

Most of the time, economists would just take this as example of the stupid that happens when people can't think clearly about prices and exchange.

Al Roth instead saw it as a constraint to work around, and came up with matching donors as a way of making things suck less given the constraint that money can't be involved.

And Chris Bishop, in an excellent bit of policy entrepreneurialism, saw the opportunity to save lives by repackaging things. The New Zealand system will compensate donors for their lost income for up to 12 weeks of recuperation. Gary Becker had estimated that you'd get an infinitely elastic supply of organs at around the $15k/kidney mark in the US. Compensation at the median wage for 12 weeks is just over $10k. That doesn't get us quite as far as would be ideal, but it is a massive improvement on the system as it was.

I like to think that we helped a bit in this. I've been blogging on this topic for a while now, and have pointed out the Israeli compensation system. The last honours project I assigned at Canterbury was running the CBA on live organ transplant. Bob Reed took over supervision of Liz Prasad's project as I left for the Initiative, then Liz turned it into a Masters with me helping a bit in the supervision.

When Chris's bill was drawn from the ballot, we quickly turned Liz's thesis into a research note and submitted on the bill. We didn't get all the changes we'd there have wanted - I still really like the Israeli priority system - but it was good. Donor compensation was strengthened from 80% of lost wages to 100%, and I like to think that our showing that the government still saves money on the deal helped in that.

Chris did all the hard yards on this one though. He built phenomenal cross-party support for a proposal that routes around one of the stupider constraints we've had in the system, and gets us a heck of a long way towards better outcomes. Huge kudos to Chris.

And this should be a lesson for the American system as well. Stop talking about buying and selling organs, start talking about letting insurers compensate donors for their lost wages while in recuperation. It ain't perfect, but it's a big step towards a better world.

UPDATE: On prompting by Ilya Somin, I've checked through the US law. I thought it was banned in the US as valuable consideration, but compensation for lost wages is allowed for. And yet it still is a substantive barrier to donation in the US: while it's allowed, it isn't done. In that case, as the public system there does fund a lot of transplants through medicare, I expect they'd just need an administrative decision to provide that compensation.