1. Using Incentives to Increase Organ Donation
Alex Tabarrok
Department of Economics
George Mason University
Using Incentives to Increase Organ Donation
Tabarrok, Alex “The Meat Market.” wsj.com, January 8, sec. The Saturday Essay.
Tabarrok, Alexander The Organ Shortage: A Tragedy of the Commons. In Entrepreneurial Economics: Bright Ideas from the Dismal Science. Oxford: Oxford University Press.
Alexander Tabarrok, "Life-Saving Incentives: Consequences, Costs and Solutions to the Organ Shortage." August 3, Library of Economics and Liberty. 6 December

4. A World Shortage
Millions of people suffer from kidney disease and the numbers are increasing rapidly but in 2007 there were just 64,606 kidney-transplant operations in the entire world.
Due to the shortage many countries are now experimenting with innovative incentive systems designed to increase the supply of organs.
China alone has 92 million people with diabetes.
I will mention some of these innovative methods from other countries as we proceed.

5. The Problem The National Organ Transplant Act (NOTA) of 1984 states:
In other words, incentives for organ donors are illegal. But incentives could increase the supply of organs and save lives.
Let’s look at the problems and paradoxes of NOTA.
“It shall be unlawful for any person to knowingly acquire, receive, or otherwise transfer any human organ for valuable consideration for use in human transplantation...”
NOTA, 42 USC 274e S. 301
In my view, NOTA has resulted in a lot of unnecessary suffering.
Incentives matter. Incentives are not the only thing that matters but incentives do matter.
How many organ transplants would be performed if doctors were not paid? If hospitals were not paid? If medical equipment manufacturers were not paid? So why do we refuse to pay the organ donor?
In fact, we have evidence on the importance of incentives not just from other fields but from organ donation.

6. Incentives and Paired Kidney Exchanges
About one-third of potential living donors are incompatible with their intended recipient.
Kidney exchanges (trade) make everyone better off.
Kidney exchanges encourage donation with incentives: Donors give a kidney so that their loved one gets a kidney.
A kidney is clearly “valuable consideration” so kidney exchanges could be illegal under NOTA. The Norwood Act (2007) amended NOTA so it would not apply to kidney exchanges.
Kidney exchanges are important but limited because barter is much harder than monetary exchange.
Need to find two couples who are in incompatible with each other but compatible with their opposite number. Double-coincidence of wants problem.
Picture from UCLA Kidney Exchange.

7. Incentives and Whole Body Donation
NOTA prohibits the receipt of valuable consideration for any organ for human transplantation but it’s not illegal to compensate organ donors when the organs are used for other reasons.
Absurd situation: Whole body donation for medical and scientific uses is often compensated—typically a free cremation.
As a result, there is a surplus of whole bodies used for scientific research and a shortage of organs needed to save lives.
On whole body donation and incentives see
Harrington and Sayre, Paying for bodies, but not for organs, Regulation 29 (4) (2006), pp. 14–19.

8. Financial Compensation for Cadaveric Donation: A Thank You for the Gift of Life
Following the whole body donation model consider the following:
Support for financial compensation is growing. All of the following are now in favor of testing the idea of financial compensation for cadaveric donation.
The American Medical Association
The American Society of Transplant Surgeons
The United Network for Organ Sharing (UNOS)
Dear Ms. Jones, as you may know, it is our standard policy to offer a gift of $5,000 to the estate of the deceased, as a way of saying "Thank you for giving the gift of life." The money can be used to help offset funeral or hospital expenses, to donate to your loved one’s favorite charity, or simply to remain with the estate, to be used in any manner the heirs see fit. No price can be placed upon the many lives that can be saved by your gift. The gift for the gift of life is merely a token of our deep and sincere appreciation for your generosity at this most difficult time.

9. Compensation for Cadaveric Donation in Israel
In 2010 Israel legalized payments to donor families to "memorialize" the deceased.
Funds for memorials may be as high as 50,000 shekel, or $13,400.
The money is paid by a nonprofit group and may be used in any way the families see fit to memorialize the deceased.
In the ceremony to present the first check under this program the director of the charity making the memorial payment, said:
"In this country we always talk about military heroism. ... [T]his is clearly a case of civilian heroism. [His organs] saved four lives. ... [T]he family should be blessed.“
In 1994 the Pennsylvania legislature established a trust fund to reimburse donor families up to $3000 for funeral expenses but the plan was never implemented because of fear that it violated NOTA.
The Organ Donation Law, passed the Knesset in 2008.
See Kidney MitzvahL Israel's remarkable new steps to solve its organ shortage.
By Sally Satel,
Quote from Satel’s article.
On PA see Howard, David H Producing Organ Donors. Journal of Economic Perspectives 21 (3):

10. Incentives: No Give, No Take
Organs today are treated like a commons – anyone can receive any organ whether or not they were willing to contribute to the commons, i.e. be an organ donor.
Consider a no-give, no-take policy for organs.
People who have signed their organ donor card are given priority if they should one day need an organ.
Advantages of no-give, no take.
Satisfies most people’s moral intuitions.
Can be implemented easily be adding points to current system. (Similarly to program already in place for live organ donors.)

11. Reciprocity in Singapore, Israel and the United States
In Singapore anyone may opt out of its presumed consent system but those who opt out are assigned a lower priority on the transplant waiting list.
In Israel in the case of kidneys two points on an 18 point scale are given if the candidate had three or more years previous to being listed signed their organ card. 
LifeSharers.org is an “organ club.” Anyone can join. Members agree that if their organs should become available they will go first to a fellow LifeSharers member.
Important. No-give, no-take systems are widely seen as ethical but their primary virtue is to increase the incentive to donate!
Economic laboratory experiments suggest that a priority system could be very effective.
Signing an organ donor card under no-give, no-take becomes a type of insurance policy – people have an increased incentive to sign because this increases their chances of getting an organ should they one day need one.

12. LYFT for Life?
Due to the shortage more kidneys are being transplanted which in earlier years would have been regarded as marginal.
Expanded-criteria donors (ECDs) refer to older kidney donors (60 yr) and those kidneys with some medical contra-indications. ECD kidneys have a reduced life-expectancy than kidneys from say young, auto-accident victims.
Raises possible issue of better matching. Today we give 20 year old kidneys to 60 year old patients.
LYFT – life years from transplant is a proposal to better match kidneys to patients to maximize life years from transplant (LYFT).
It's not just age that matters, it turns out that the longer a patient has been on dialysis the less is their life expectancy after transplant (dialysis stresses the body so the sooner we get someone a transplant the better).  Although it may seem unfair, if we want to maximize total life expectancy we are doing the wrong thing by giving more points to patients who have been on the list longer.  

13. Live Donation
About 40% of all kidney transplants in the US come from live donors.
A small fraction of livers also come from live donors.
Live donation is a cost, a failure of deceased donation as well as an opportunity. Mixed feelings.

14. Financial Compensation for Live Donation
About 40% of all kidney transplants are from live donors.
Nobel prize winner Gary Becker and Julio Elias (2007) combine estimates of the value of life (willingness to take risks for monetary compensation) and the small risk of donating a kidney to calculate that:
A payment in the range of $15,000 would double the number of live transplants and eliminate the shortage.
Taking into account differences in income this figure is consistent with actual payments to donors in countries such as India and Iran.

15. Using Financial Compensation to Leverage Live Donation
10 kidney transplant chain, 20 people. Pay it forward model.
Kidney chains begin with a donor who does not receive a kidney (to a loved one) in return. If the original donor gives to someone who has a willing but incompatible live donor a chain can be created.
Financial compensation could potentially be used to begin many more kidney chains Picture from People Magazine, Nov. 30, 2009

16. Financial Compensation for Live Donation in Iran (and Singapore)
Iran is the only country in the world regularly paying compensation for live donors.
In a new program, Singapore allows payments for lost income, medical costs and lifetime insurance coverage. First payment was Nov
The Iranian system began in 1988 and eliminated the shortage of kidneys by 1999.
Iran is the only country in the world without a shortage of kidneys.
The Iranian system is managed by a nonprofit, volunteer-run patient association.
Payments from government and charity are ~$3,500-$6,000.

17. Understanding Compensation
Compensating donors does not necessitate any change in how organs are allocated.
We can compensate donors but continue to allocate organs according to the UNOS point system.
Compensation need not be upfront but could come in the form of an annuity, tuition voucher or contribution to a retirement plan.
In the latter case compensation should be a higher amount.
Compensation should also include a substantial non-monetary recognition for the gift of life.

18. Saving Money while Saving Lives
Dialysis is expensive and most of the cost is paid by the Federal government through the End Stage Renal Disease (ESRD) program which serves over 500 thousand patients and has expenditures of $24 billion a year (2007).
Transplants pay for themselves within 2 years and are considerably cheaper than dialysis over prospective lifetimes.
Matas and Schnitzler (2004) calculate that on a discounted basis each transplant saves $120,000 compared to dialysis (2010 dollars).
Medicare Cost of Dialysis Versus Transplant
Per-year cost for dialysis: $72,064.
Cost of transplant (year one): $106,373.
Per-year cost of transplant after year one: $24,572.
On ESRD see
For a review of studies of transplant effectiveness compared to dialysis see Huang, Thakur and Meltzer The Cost-Effectiveness of Renal Transplantation. In Satel, S. (ed) When Altruism Isn’t Enough. AEI Press.
Matas, Arthur J, and Mark Schnitzler Payment for living donor (vendor) kidneys: a cost-effectiveness analysis. American Journal of Transplantation: Official Journal of the American Society of Transplantation and the American Society of Transplant Surgeons 4, no. 2 (February):  

19. Saving Money While Saving Lives
At $10,000 per cadaveric donation the cost of financial compensation for 12,000 organs would be $120 million and savings would be $480 million.
Net savings of $360 million per year.
A transplant saves $120,000.
What would it take to increase cadaveric donation from 8000 to 12,000 a year? $2500, $5,000, $10,000? Assume, $10,000.
What would it take to increase live donation from 6,000 per year to 12,000? Assume, $15,000.
Thus increased organ donation could easily save the Federal government billions of dollars. On a pure cost-benefit analysis paying donors pays for itself!
More importantly transplants increase life-expectancy and quality of life.
At $15,000 per live donation the cost of financial compensation for 12,000 organs would be $180 million and savings would be $720 million.
Net savings of $540 million per year.
Increasing from 8,000 to 12,000 is high but probably doable. Estimates suggest the current recovery rate of donatable arguments is about 50-60%. See Becker and Elias for estimates that the maximum supply is ~ 15,500-24,000.
Increasing live donation to 12,000 is clearly doable with the right price since millions would be eligible to donate. Becker and Elias estimate an increase of about 6000 (there increase of 44% includes live and cadaveric donation.)

20. Repugnance and Live Donation
No hiding the fact of kidney tourism.
Recall that millions of people suffer from kidney disease but in 2007 there were just 64,606 kidney-transplant operations in the entire world.
Legal market versus illegal markets.
Drug market – we shouldn’t legalize drugs, look at all the violence associated with drugs. Legalizing drugs will increase violence.
Pakistani men show their scars from kidney donation. (The Pakistan market has since been shutdown.)
Photo: Asim Tanveer, 2008.

21. Organ Donors as Volunteers
Is it wrong to pay people to take on risk?
Compensation is widely accepted as a payment for risk.
The annual fatality risk from being a commercial fisherman in Alaska is 4 to 5 times higher than the one-time risk of donating a kidney.
We honor people who risk their lives in the Armed Forces but we do not expect them to do so without compensation.
Note that Commercial fishing fatalities in Alaska ( ) were 140 per 100,000 or 14 per 10,000 per year. The risk to a live donor of a kidney is primarily in the 90 days after the operation and is a one-time risk of approximately 3 per 10,000 (per operation). After the operation there appears to be no additional risk to a kidney donor (donors can live perfectly well with one kidney.) See

22. What is Repugnant?
We call people who give an organ away, heroes. So why is it repugnant to sell an organ?
Attitudes about what is repugnant change.
Adam Smith (1776) noted that in his time:
“There are some very agreeable and beautiful talents of which the possession commands a certain sort of admiration; but of which the exercise for the sake of gain is considered, whether from reason or prejudice, as a sort of public prostitution.”
Examples: acting, opera singing and dancing.
Smith, Adam. An Inquiry into the Nature and Causes of the Wealth of Nations. Edwin Cannan, ed Library of Economics and Liberty. Retrieved April 6, 2010 from the World Wide Web:
Today the list strikes us as peculiar, perhaps even foolish. What could possibly make opera singing admirable when done for free but despicable when done for pay?
And yet, however peculiar the views of Adam Smith's contemporaries were on financial compensation for opera singers we can at least say this in their favor—no one ever died because of a shortage of singers. People are dying because of a shortage of organs – that is what, I find that repugnant.

23. Incentives matter but they are not the only things that matter
Efficiency can be improved. 19% of recovered kidneys are not transplanted.
Donation rates and transplant rates vary considerably by region.
Life style factors can go a long way to reducing the demand.

24. Conclusions
The worldwide shortage of organs will get worse before it gets better.
The shortage is increasing the number of countries that are experimenting with incentives.
Lifting the ban on compensating organ donors would greatly increase the supply of organs saving many thousands of lives.

25. Using Incentives to Increase Organ Donation
Alex Tabarrok
Department of Economics
George Mason University
Using Incentives to Increase Organ Donation

27. Price Controls Create Shortages