New Zealand to Compensate Organ Donors

by on December 1, 2016 at 7:25 am in Economics, Law, Medicine | Permalink

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.

1 The Engineer December 1, 2016 at 7:29 am

The dialysis-industrial complex would not be pleased.

In all seriousness, there has been an explosion in dialysis center building, and the facilities rival luxury hotels in their amenities. This is not an unprofitable industry, and I do wonder how their lobbying effects this issue.

2 rayward December 1, 2016 at 7:38 am

Lost income? So the unemployed donor receives nothing and the brain surgeon donor receives several hundred thousand dollars? How would the “lost income” be determined? If I need a kidney, may I ask how much was paid for the kidney? If I need a kidney, would it matter to me if the donor is shiftless or a brain surgeon?

3 rayward December 1, 2016 at 7:50 am

I believe Iran is the only country that allows the sale of organs. Here is the Wikipedia page. https://en.wikipedia.org/wiki/Organ_trade

4 rayward December 1, 2016 at 8:12 am

Of course, prohibiting the sale of organs doesn’t mean there’s no market in organs, it just means it’s a black market, in which prices are artificially high. Legalizing the market should lower the price and provide for a more equitable distribution of organs. The same might be said of the market in babies (or people for that matter). One objection to the sale of organs is based on the premise that organs are equivalent to the people they are harvested from: if it’s objectionable to sell people, then it’s objectionable to sell their organs. The ancient world had a better appreciation for markets, including markets in people; indeed, one will search in vain for an objection to slavery in the New Testament. I don’t doubt that there would have been a robust market in organs in the ancient world if only they knew how to harvest and implant them. Maybe the obsession with the human anatomy in the ancient world wasn’t what we assume it to have been. Since they appreciated markets in people, they would appreciate markets in organs. Maybe those today who base their philosophy/ideology on the ancients do so because of their shared belief in the sanctity of markets.

5 Private Obvious December 1, 2016 at 8:36 am

“So whatever you wish that others would do to you, do also to them, for this is the Law and the Prophets.”
That is in the New Testament, is attributed to Jesus of Nazareth (a kind of very mystical version of Confucius) and would make slavery kind of difficult.

6 rayward December 1, 2016 at 8:48 am

The absence of direct condemnation of slavery in the New Testament has long been the subject of debate among scholars and non-scholars, the religious and the non-religious. One explanation (of many) is that slavery was considered more of a political issue than a moral issue in the ancient world. Or maybe Jesus and the apostles appreciated markets.

7 kevin December 1, 2016 at 9:02 am

I’d say its equally due to the subjective nature of “slavery”. In principle it means being forced to work, but if a non-slave is given the option to work, or is thrown in a debtors prison is that really not just the same thing–slavery? Parallels occurred in our own country. Plenty of previous slaves were no better off, and were effectively still slaves in the sharecropping system after slavery had officially been outlawed.

I’d say “do unto others as you would have done unto you” is much less convoluted then trying to define exactly what constitutes slavery, especially as cultures/languages/technologies change over thousands of years.

8 dearieme December 1, 2016 at 9:19 am

I ask in all ignorance: was there much slavery in Galilee in Jesus’ time?

9 rayward December 1, 2016 at 2:04 pm

Let’s accept the claim by anti-semites that the Old Testament story of Jews being enslaved in Egypt is a myth. Jesus was a Jew, all of His disciples were Jews, even Paul (who took the faith to the Gentiles) was a Jew. And what happened to Jews after the crucifixion of Jesus by the Romans? Jerusalem was destroyed in the first Jewish-Roman War and Jews who survived the war were taken into slavery. Since most of the New Testament was written after the war, one might expect the New Testament to make a big deal out of the war and the enslavement of Jews. Maybe dearieme has an explanation.

10 msgkings December 1, 2016 at 2:14 pm

rayward, the correct spelling is (((Jesus))) and (((Paul)))

11 dearieme December 1, 2016 at 3:38 pm

If the NT was written for gentiles it might not have cared much about those slaves.

Maybe nobody cared much about slaves taken as a consequence of losing a war if only because being enslaved was presumably better than being butchered. Or even because people who didn’t like rebellions approved of the losers being punished.

But the interesting question is why is Jesus not reported as saying anything about slaves? Possibilities (i) He didn’t say anything about it because it wasn’t an issue in Galilee in his time. (ii) He did say something but it was lost or suppressed.

12 dearieme December 1, 2016 at 3:42 pm

Maybe Galatians explains the NT attitude.

There is neither Jew nor Greek, there is neither bond nor free, there is neither male nor female: for ye are all one in Christ Jesus.

13 rayward December 1, 2016 at 4:16 pm

Jesus is timeless: according to the Gospel of John, “He always was”. If He always was, slavery was too. Paul’s letters (the undisputed letter to Galatians included) were written before the war. His hope of Jew and Gentile as one suffered a setback when his head was separated from the rest of his body. Paul couldn’t change his mind about Gentiles, having lost his.

14 Thiago Ribeiro December 1, 2016 at 6:06 pm

Really? I remember an Epistle saying that slaves should be good to their masters and masters should be good to their slaves, basically what Mohammed, not exactly Abraham Lincoln, would say too. The Roman Stoics had preached kindness to the slaves, too.

15 dan1111 December 1, 2016 at 8:15 am

I agree wholeheartedly. Paying the rich more than the poor for providing something of equivalent value, all in the name of “reframing” to make it more palatable to some people? Dumb. It’s certainly not “potato, potahto” in that sense.

Perhaps they could have used this reframing, but without the unfair result. For example, paying all donors a standard rate based on some average amount of lost income.

16 Pshrnk December 1, 2016 at 9:25 am

If you want to maximize the number of organs donated, the relevant concept is OPPORTUNITY COST. You do not maximize donation by paying “some average amount of lost income.”

17 JWatts December 1, 2016 at 9:49 am

Agreed, and the debate is silly. If it’s going to save the government $1.5 million to $3.0 million for every transplant, then a few hundred thousand in compensation for a very few high end cases, is still going to be worth it. You can always cap the amount if it becomes an issue. (100% of lost compensation, not to exceed $100,000 or 6 months of wages, which ever is less).

18 dan1111 December 1, 2016 at 10:00 am

The goal is not to maximize the number of organs donated, but to get enough organs to meet demand, for minimal cost.

This would be best served by a market system, which would have a single price for kidneys, set at the level required to get the needed donations. Well, perhaps there wouldn’t be a single price (maybe some kidneys are more desirable than others, based on factors like donor age and compatibility). But the price would be set by demand.

Setting compensation based on donor income makes the system less cost efficient, and it also is a distortion that artificially lowers the compensation given to poor donors in comparison to what they would get in a free market.

If this is the best system that can be realistically implemented, then so be it. I agree that it is better than nothing. But it harms the poor in the name of helping them.

19 JWatts December 1, 2016 at 10:14 am

Yes, those are good points. It’s irrational to “hate” on an efficient market, but since such a large group of people are emotional about the issue, I just assumed that a market based approach was off the table as an option.

20 Troll me December 1, 2016 at 3:07 pm

The concern is that I might decide to go sell a kidney to pay next month’s rent and (in the extreme) that legal markets would lead to an underclass of people who basically exist to sell extra body parts to the monied class.

Offering compensation only for lost wages and other costs insures that you’re not going to have this sort of outcome or anything like it.

21 JWatts December 1, 2016 at 3:53 pm

“…that legal markets would lead to an underclass of people who basically exist to sell extra body parts to the monied class.”

Ok, well let’s just keep the ban on people whose income is below the poverty line from selling their organs. That would resolve the issue.

22 dan1111 December 2, 2016 at 2:03 am

@TrollMe I understand that is the concern. But this concern is rooted in a classic paternalistic attitude toward the poor: fear that if people have an option, they will use it to make a bad choice, and therefore that option should be taken off the table–even though it’s potentially of great benefit to those who use it wisely.

23 JFA December 1, 2016 at 9:56 am

It probably wouldn’t matter to you where it’s from as long as you get a good one. This legislation (which could be improved) increases the likelihood of getting one. As mentioned by PSHRNK, it is the opportunity cost that matters. And if you are in need of a kidney (either because you are in significant pain due to the dialysis or will soon die without a transplant), I doubt the first thing that pops into your mind is “Ugh… I can’t believe the government is compensating people based on their foregone income. That means there will (gasp) be some inequality. I would rather die than have that on my conscience. Long live the proletariat. Workers (and, I guess, non-workers, too) unite!” No, that won’t be the first, second, or eighteenth thing you think about. You’re going to be thrilled AF because this legislation increases your chances of getting a desperately needed organ.

I thought about being non-snarky, but as someone who had a loved one in need of a transplant for years and watched her suffer daily until she finally got a kidney, I have no patience for people who can only take a dump on progress.

24 kevin December 1, 2016 at 10:50 am

I dont read the fellow commenters as “take a dump on progress”, but rather taking a dump on missing out on even greater progress. By paying the rich more then the poor you are missing out on an opportunity to attract more poor people to donate organs. If you’re unemployed you have no incentive to donate

25 JWatts December 1, 2016 at 12:24 pm

” If you’re unemployed you have no incentive to donate”

No, that’s not true. You still have the same incentives that exist. You just don’t gain the additional compensation for lost wages. A correct statement is:

‘This legislation does not increase the incentives for unemployed people to become donors.’

26 The Other Jim December 1, 2016 at 1:41 pm

Forget it, JWatts. He doesn’t get it and he never will. He doesn’t want to.

The only way to make him happy would be to charge the brain surgeon $50K to donate his kidney so that the homeless person can be given $50K to donate his kidney.

27 Bill December 1, 2016 at 8:17 am

Just as a wealthy foreigner can get a visa for investing in a project which creates so many new jobs, perhaps the new administration will consider granting citizenship to illegal immigrants who offer a kidney.

28 dan1111 December 1, 2016 at 9:51 am

Anchor organs?

29 Bill December 1, 2016 at 11:07 am

+1

30 JFA December 1, 2016 at 9:59 am

Haha… the new administration extend offers of citizenship after just tweeting about taking citizenship away if you burn a f#%king flag… haha… just… hahaha… Excuse me while I show this comment to my friends.

31 Bill December 1, 2016 at 11:06 am

JFA,

Please do not share your response with your friends, as your modification of the proposal would lead to having all flag burners who are stripped of citizenship be only able to get their citizenship back if they gave a kidney.

Is it worth a kidney?

I only have two.

32 Troll me December 1, 2016 at 3:10 pm

Sounds like a good round of flag burning is in order?

33 rayward December 1, 2016 at 8:40 am

Some might be more inclined to support a legal market in kidneys because the government pays for dialysis. But that’s speculation. Why does the government pay for dialysis but not (for example) chemotherapy? Dialysis (or chemotherapy) is no picnic; indeed, long-term dialysis patients often die from failure of other organs (such as the heart) due to the stress on the other organs.

34 JWatts December 1, 2016 at 8:56 am

“To an economist, potato, potato. ”

Come now Alex, really? To someone that only looks at the math sure, the numbers might be the same. But this blog alone is full of the inherent psychology in financial transactions and the different outcomes that result from changes in framing.

35 David R. Henderson December 1, 2016 at 9:01 am

Excellent post.
One correction, not of you, Alex, but of the authors. Given that they find the benefit/cost ratio to be 3, that means that benefits exceed costs by a factor of 2, not 3.

36 dearieme December 1, 2016 at 9:20 am

I’m not sure that that is a correction, more a matter of drawing attention to a rather ambiguous use in English.

37 JFA December 1, 2016 at 10:08 am

Actually, when policy is chosen by how much benefits exceed costs, then it is more than a matter of ambiguous use of language.

38 Troll me December 1, 2016 at 3:16 pm

3:1

3 x 1

The first number is three times larger than the first.

Larger by a factor of three.

The first number is 200% larger than the second. I think that’s where you went wrong.

39 dearieme December 1, 2016 at 9:17 am

If there is not a clean market in organs there will be a dirty one. People who are VIPs, who can pull strings, or scratch backs, will be favoured. In other words, it will be settled by privilege rather than moolah. Won’t it?

40 Axa December 1, 2016 at 9:30 am

Social benefits:12 billion a year in less taxes. How? Individual risks: living with 1 kidney is risky but manageable, but anyway more risky. I fell lucky for not being the one selling this idea.

Yes, there’s literature on everything: “Living Donor Kidney Transplantation: Overcoming Disparities in Live Kidney Donation in the US—Recommendations from a Consensus Conference”
http://cjasn.asnjournals.org/content/early/2015/04/16/CJN.00700115.full

“Recommendation 1: Remove Financial Disincentives to LKD (living kidney donor)…..Concern for out-of-pocket expenses, lost wages, job insecurity, and risk of insurability problems (health, life, disability) for living donors deters transplant candidates from pursuing LDKT and healthy adults from considering LKD.” So, it’s not only lost income, probably lost job. It’s illegal to refuse insurance or charge more to living kidney donors, but insurance companies still give them a hard time.

“Recommendation 2: Implement Culturally Tailored, Community-Based LDKT/LKD Educational Programming at Multiple Stages of the Transplant Referral Process” Basically religious issues.

“Recommendation 3: Engage a Transplant Liaison in Community Nephrology Practices and Dialysis Clinics” I did not expect this one but it makes sense. Donating an organ is a leap into the void even to the most altruist and cultured individual. It would be better if there’s a coach guiding potential donors through health, law or insurance questions. For short: coaching is needed for living kidney donors.

This research article from actual doctors goes against the stereotype of cold-blooded doctors who see patients and not humans. It’s not about giving cash to donors, it’s about helping them sustain their financial security. The other recommendations are pure human problems such as religious fears and lack of cognitive capacity to deal with an event we have no preparation for.

41 JWatts December 1, 2016 at 9:54 am

““Recommendation 2: Implement Culturally Tailored, Community-Based LDKT/LKD Educational Programming at Multiple Stages of the Transplant Referral Process” Basically religious issues.”

No, it’s not just religious.

“A significantly higher proportion of organs were donated by white non-Hispanic Americans than either black or Hispanic Americans.”

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2954674/

42 Axa December 1, 2016 at 10:32 am

Did you read your link?

“Based upon available data, the negative views towards organ donation present in the black and Hispanic populations appears to be related to three major factors (6). First, there are religious beliefs—specifically that an intact body is thought by a large number in these two races to be important for burial. Second, there is the difficulty experienced in making a decision at a time of grief coupled with a lack of knowledge relative to a donor’s wishes with respect to organ donation. Third, there is a perceived lack of trust in the providers of health care by family members of identified potential donors, eg, a misguided belief that adequate care may not be provided to an individual who carries a donor card (6).”

43 JWatts December 1, 2016 at 1:31 pm

Yes, hence it’s not just religious, it’s cultural. With religion being one factor in the cultural differences but not the only factor.

44 Mark Brophy December 1, 2016 at 7:43 pm

Living with one kidney is not manageable, it’s a miserable life because it severely limits diet. Kidneys process protein so eating meat, nuts, or avocados must be limited, and a single glass of wine each month is all a single kidney can process. There are also limits on potassium sources such as green vegetables.

45 GoneWithTheWind December 1, 2016 at 10:28 am

I am naturally suspicious whenever I hear a government proposal to spend more of my money but they tell me it will actually save me money. But lets agree the idea of increasing the availability of kidney transplants is good and that donors would be motivated by money. Why not then set a single flat payment for a kidney, say $10,000. No more no less. The amount could be adjusted as necessary to allow supply to meet demand. .

46 Bill December 1, 2016 at 11:24 am

This compensation scheme will actually be a good natural experiment if conducted properly. The issues will be: 1) does this increase the total supply; 2) does it alter the composition of the supply to make the marginal additional supply more costly (e.g., people who would have volunteered now get paid, which means that you need to measure the cost of the marginal kidney (one that was induced only because of a payment) to include the costs of kidney payments to those who would have volunteered anyway; 3) what other international programs (automatic opt in unless opt out) are more effective; 4) will the recipients be rationed based on their income (i.e., will this evolve into a bidding war for kidneys); 5) if the price of the program increases will there be pressure to have the recipient pay.

47 David Howard December 1, 2016 at 11:36 am

Thanks for the heads-up. This actually isn’t such a potato-potato scenario. Compensating people for lost wages won’t lead people to start donating to patients to whom they have no relationship. Paying people more than lost wages may bring unrelated donors out of the woodwork. Both work at the margin by increasing incentives, but they operate on a different pool of potential donors.

48 Bill December 1, 2016 at 1:18 pm

I think you are right in that framing as compensation for cost places less risk on the altruistic motivation inducement. However, if the program fails to produce the intended effects, it is more costly than necessary, and Alex will claim that it was not a true experiment in the price elasticity of organs.

Which leads me to suggest:

Alex, on your way to India, why not stop in New Zealand and drop off a kidney.

I wonder what the supply response to price is for economists to donate their kidneys.

Or, What’s the reservation price for Alex’s kidney. Does the reservation price of an economists kidney differ from the general population.

Inquiring minds would like to know.

49 Andre December 1, 2016 at 12:25 pm

One of the best times to legalize and formalize the collection of organs is when you have an influx of poor and desperate refugees from south east asia that you don’t want around anyway. Just sayin….

50 Eric Crampton December 1, 2016 at 2:29 pm

A few notes about the NZ system.

1. Agree with commenters that it isn’t as clean as you or I might ideally hope for. But it’s much better than that which preceded it, and could be a model for the US.
2. Compensation is at 100% of lost earnings. Our submission argued that there should be a cap at some reasonable multiple of the average wage, so we didn’t start spending millions on a kidney in weird cases, and that those who are unemployed should be compensated as though they were employed at the minimum wage for the duration of recuperation. The Committee’s compromise was to abate any work requirements on benefits that require beneficiaries to be looking for work for the duration of that recuperation.
3. The cost-benefit stuff here: transplants, and dialysis, are much cheaper in NZ under the public health system, with the usual tradeoffs implied by that. Net result is that a transplant saves the government $120k or more, so plenty of room to compensate donors for time out of work.

51 Troll me December 1, 2016 at 3:24 pm

A legal market would be safer than a black market in terms of the medical procedure itself and upholding contracts/agreements, etc. Once you’re on the black market, you generally lose all state protection (in part because you’re blackmailed and will do nothing). Since it is generally the poor and unconnected who are selling organs through black markets, it is easy to guess that these people do not have much capacity to tap networks who can uphold whatever original agreements were made.

Fortunately, in most places, the black market in organs is an extremely small share of the market. Where it is not, unscrupulous doctors and middle men rake in large sums of money by taking advantage of desperation both on the part of the poor and on the part of those who need organs.

At least a handful of highly reputed journalism outlets have produced narrative feature stories that get into this. Considering data quality in the black market, a handful of such stories plausibly even constitute better information than the most advanced empirical analysis you might find … most especially for the case of developing countries with little institutional capacity (or desire) to monitor the situation.

52 Dr Harry December 10, 2016 at 9:49 am

A kidney is bought for a maximum amount of $400,000.00, US Dollars.The National foundation is currently buying healthy kidney.My name is Dr Harry Moore, I’m a Nephrologist in the kidney National hospital.Our Hospital is specialized in Kidney Surgery and we also deal with buying and transplantation of kidneys with a living an corresponding donor. We are located in Indian, Canada, UK, Turkey, USA, Malaysia, Nigeria, South Africa etc If you are interested in selling or buying kidney’s please don’t hesitate to contact us via Email : ubthkidneyfoundationinfo@gmail.com
Need Genuine Donors.

Waiting for your responds…..
Best Regards….
Dr Harry Moore
+2347063370312

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