Rent Seeking Kills

It’s illegal to offer compensation for a transplantable human organ.  As a result of the price control there is a shortage of organs and thousands of unnecessary deaths.  None of this is news to readers of this blog.  The price control on organs, however, kills in another less well recognized manner.  The reduced supply of organs raises their value.  Organ donors can’t capture that value so who does?  Transplant centers.

    Transplant centers are artificially high profit centers because they capture some of the rents generated by the shortage of organs.  As a result, there are too many transplant centers in the United States and each center performs too few transplants.  Practice makes perfect so when a transplant center performs only a few operations a year lives are lost.

Medicare requires that transplant centers perform 12 transplants a year to be certified but many programs are in violation of that standard with little consequence.  Medicare is even thinking of reducing the standard from 12 per year to 9 in 30 months.  As one specialist says "I wouldn’t take my car to be serviced by someone who repaired nine cars over the past three years.  Would anyone do that?"

This Washington Post article has more on the excess number of centers although it doesn’t draw the connection between the organ shortage and the incentive to build a center.  Here’s some data, from the article, on centers local to Washington.